Australian capital city house prices continued to push higher in July, according to latest data released by CoreLogic on Monday.
The group’s Home Value Index rose by a further 0.8% last month, leaving capital city house prices up 6.1% from a year earlier.
Not only are prices now at the highest level on record, they have now increased by 6.3% over the first seven months of 2016.
According to CoreLogic, prices in Sydney, Melbourne, Adelaide and Hobart all recorded monthly gains in excess of 1%, helping to offset declines of 0.8%, 0.9% and 6.2% in Brisbane, Perth and Darwin.
Sydney, the largest and most expensive property market in the country, saw prices increase by 9.1% compared to July 2015, the largest of any capital over the past year.
Over the quarter prices alone increased by 5.6%, coinciding with the RBA’s decision in May to cut interest rates to a record-low level of 1.75%.
The median dwelling price in the city — including both apartments and houses — now stands at an eye-watering $775,000, nearly $200,000 more than second-placed Melbourne at $585,000.
The table below, supplied by CoreLogic, reveals the monthly, quarterly and annual price changes for each Australian capital, along with the actual median dwelling price.
With price growth in Sydney and Melbourne now spreading to other parts of the country, CoreLogic notes that July marked “the 50th month of the combined capitals growth cycle, which commenced in June 2012”.
“Over the cycle to date, capital city dwelling values have risen by 38.3 per cent,” it notes.
Tim Lawless, head of research at CoreLogic, notes that the national growth figure was largely due to substantial price increases in Sydney and Melbourne.
“This demonstrates the strength in the Sydney and Melbourne growth trend with dwelling values across the two largest capitals recording a cumulative 61.3 per cent and 42.0 per cent over the cycle to date,” he said.
“Hobart, where the growth trend has recently accelerated, has been the next best performer with values rising 17.6 per cent over the growth cycle followed by Brisbane (17.4 per cent), Adelaide (14.3 per cent) and Canberra (12.4 per cent).”
While Lawless believes that the recent moderation in capital city house price gains should “be viewed as a positive sign that growth in dwelling values may be returning to more sustainable levels”, he notes that house prices, as a whole, are “still tracking considerably faster than income growth resulting in a deterioration of housing affordability”.
When the Reserve Bank of Australia last met to discuss monetary policy on July 5, the board noted that “dwelling prices have risen again in many parts of the country over recent months.”
Given the continued strength seen in July, the strength in housing prices, particularly in Sydney, will no doubt be a consideration when the RBA board meets tomorrow to determine whether or not it will reduce interest rates further.
“Policy makers will be wary of lower interest rates creating renewed upwards pressure on housing markets,” says Lawless. “The strong clearance rates, as well as the fact that dwelling values are continuing to move higher may make the RBA’s decision to cut rates more difficult, despite the low inflation trend and high dollar.”
Last week, based on preliminary figures, CoreLogic reports that national capital city auction clearance rates continued top strengthen, led by Sydney and Melbourne.
“Auction markets are yet to show a slowdown, with preliminary results over the weekend indicating auction clearance rates remain high,” said Lawless. “Sydney recorded the highest preliminary clearance rate of the year to date at just over 80 per cent and Melbourne clearance rates are tracking in the mid 70 per cent range.”
The Reserve Bank of Australia will deliver its August monetary policy decision at 2.30pm AEST on Tuesday.
Markets price in around a two-in-three chance that a 25 basis point rate cut will be delivered. 20 of 25 economists polled by Bloomberg also expect that an additional rate cut will be delivered.
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