- ▶ Best performing capital city: Melbourne and Hobart +1.9%
- ▶ Weakest performing capital city: Darwin -4.7%
- ▶ Highest rental yield: Darwin 5.6%
- ▶ Lowest rental yields: Melbourne 2.9%
Using the upgraded hedonic index methodology, the CoreLogic August home value index results for the month confirm a slowdown in housing market conditions in Sydney, while Hobart emerged as the country’s best performing capital city based on growth in dwelling values over the past twelve months.
National dwelling values remained flat during August, with capital city values edging 0.1% higher. Simultaneously, regional dwelling values slipped 0.2% lower. According to CoreLogic head of research Tim Lawless, this steady result provides further evidence that the housing market has moved through its peak growth phase.
He said, “We’re seeing capital gains in markets like Sydney, which were previously very strong, now being weighed down by affordability constraints and tighter lending conditions. The knock-on effect is a curb in investment credit growth and higher mortgage rates for investment and interest only mortgages.”
“Looking at the past three months, it provides a clear indication of the trends, with national dwelling values rising by only half a percent over the three months to August 31 – the lowest rolling quarterly gain since June last year. The national market moved through a peak rate of growth during the three months ended November 2016, when dwelling values were rising at the rolling quarterly pace of 3.7%,” Mr Lawless said.
Round the grounds for dwelling values
The slowdown in growth conditions is most visible in Sydney where over the past quarter, the values have increased 0.3% with no recordable change in values during August. Since 2012, the typical Sydney dwelling has seen its value rise by 75% including 13% in the past 12 months. Important to note that over the past quarter, the values have increased 0.3% with no recordable change in values during August. Rental yields in Sydney are at a record low of 3.0%
In Melbourne, the housing market has been more resilient to a slowdown. Having recorded an annual growth of 12.7% in the past 12 months, it’s quarterly growth still remains strong at 1.9% (down from the peak in November of 4.4%) and returned a 0.5% growth in dwelling values over the month of August. This rate of growth during August is up there with the best performing capitals over the past period. Similar to Sydney, Melbourne’s rental yield is at historic lows of 2.9%
Hobart continues to gather momentum where the annual pace of capital gains, at 13.6%, is now the highest of any capital city and according to Mr Lawless, it hasn’t been this high since 2004. With median values a third of that in Sydney and half of the Melbourne median, Hobart is the strongest performing capital with 13.6% annual growth so far with 1.9% and 0.6% growth for the quarter and month respectively. With a combined capital growth and rental yield giving a total annual return of 19.5%, Hobart represents a very attractive investment proposition.
Perth and Darwin continue to see values fall over the past month and rolling quarter. However, according to the numbers, the annual trend highlights the rate of decline has been easing. Since peaking in 2014, Perth dwelling values have declined by a total of 10.8%, while the cumulative decline across Darwin has been more severe with values down 18.6% from the market peak.
Both have recorded declines in annual, quarterly and monthly dwelling values with total annual return for investors at 1% (combined capital ‘growth’ and rental yield)
Brisbane, Adelaide and Canberra all performed similarly with modest annual growth of mid single digits and all recorded quarterly growth between 0.2 and 0.4% however the August change in dwelling values has been mixed with 0.% change for Adelaide, 0.2% growth for Brisbane and a healthy 0.6% for Canberra (which is on par with Hobart as the best combined performer for the month).
Rental yields slipped to a new record low across Australia in August.
Nationally, the gross yield on a dwelling reduced to 3.62% in August, down from 3.87% in August last year. “Record low yields are largely a capital city phenomenon, with yields across the combined regional areas of the country tracking 165 basis points higher than the combined capital city yield,” Mr Lawless said.
Index results as at August 31, 2017
