Capital city dwelling values increased by 0.5% in February, however the trend in annual growth has moderated over the past seven months from 11.1% down to 7.6%.
According to the February 2016 CoreLogic RP Data Hedonic Home Value Index results released today, dwelling values across Australia’s combined capital cities showed a 0.5% rise in February, pushing dwelling values 1.4% higher over the past three months.
In February, home values rose across each capital city with the exclusion of Perth and Canberra.
Over the past three months, dwelling values have increased across all capitals except Sydney (-0.2%).
The largest monthly increases in home values were recorded in the cities that have been underperforming over the growth cycle to date; Hobart dwelling values were 2.9% higher, Adelaide showed a 1.9% rise, and Brisbane home values increased by 1.8%.
Perth and Canberra were the only cities to record a monthly fall in values, down -1.1% and -0.2% respectively.
Sydney was the only capital city to have recorded a fall in dwelling values over the past three months, down -0.2%.
The cities to record the greatest value rises over the past three months have been:
Hobart (8.5%), Melbourne (3.8%) and Brisbane (2.0%).
Even though home values have trended lower over the year in Perth and Darwin, they have recorded value rises of 0.2% and 0.3% respectively over the past three months.
Dwelling values are still increasing across most capital cities however, the results remain diverse.
Sydney and Melbourne remain the strongest markets in trend terms, however, the gap is widening between the performances of Melbourne relative to Sydney.
Over the past 12 months, combined capital city home values have increased by 7.6%, with the annual rate of growth down from a recent peak of 11.1% recorded in July last year.
Melbourne has maintained its number one growth position, with annual capital gains of 11.1%.
Melbourne values appear to be holding reasonably firm since December last year with the annual rate of capital gain virtually level over the past three months.
Sydney’s annual rate of growth has continued to moderate, having almost halved from its cyclical peak of 18.4% recorded in July last year to reach 9.5% growth over the past twelve months.
Despite the slowing trend, Sydney remains the second best performing capital city over the past twelve months, however, a few of the smaller cities, where growth rates have recently accelerated, may start to rival Sydney’s position over the coming months.
The trend in home value growth is showing signs of increasing in those markets that have previously underperformed.
These include Brisbane, Adelaide, Hobart and Canberra.
Affordability constraints aren’t as apparent in these cities and rental yields haven’t been compressed to the same extent as what they have in Melbourne or Sydney.
Home values increased in Brisbane by 5.5% over the past year, which is the fastest annual rate of value growth in a year.
In Hobart, home values are 6.2% higher over the year, which is its fastest annual rate of home value growth since July 2010.
The CoreLogic-Moody’s Analytics forecasts for 2016 indicate the pace of appreciation in Melbourne home values is likely to remain more resilient to a slowdown this year, while cities like Brisbane, Hobart and Canberra are set to see an improvement in the growth trend.
The forecast seems to be evident so far in these numbers.
House values continued to increase at a faster annual pace than unit values, however the gap in capital gain performance has narrowed over recent months.
Over the past year, house values have increased by 7.8% compared to a 6.2% increase in unit values.
Over the current growth phase, house values have increased by a total of 33.3% compared to a 22.8% total rise in unit values.
While home values continue to rise, the rental market is underperforming with no growth in weekly rents across the combined capital cities index over the past twelve months; this is the lowest rate of rental appreciation on our records, which extend back to 1996.
Weekly rents have shown a modest fall in Brisbane (-0.7%) and Adelaide (-0.4%) over the past twelve months, however the falls in Darwin (-13.3%) and Perth (-8.4%) rents are much more substantial.
Although value growth has outpaced rental growth, gross rental yields have remained on hold over the past month at 3.4% for houses and 4.3% for units.
Melbourne continues to show the lowest rental yield profile of any capital city, with houses returning an average gross yield of 2.9% while Melbourne units are providing a gross yield of 4.0%.
Other housing market metrics such as listing numbers, clearance rates and investment activity are also pointing to slower, but still positive, housing market conditions.
Across the combined capital cities we are seeing a higher number of new and total property listings relative to the same time last year.
This in itself is quite interesting considering clear evidence of a slowing market over the second half of last year.
With the number of newly advertised properties moving higher, it seems that vendors have begun 2016 with renewed levels of confidence.
Listings in Sydney will be an interesting litmus test for the market’s resilience.
The number of newly advertised listings across Sydney is 6.8% higher than a year ago while total listings are 22.3% higher than a year ago.
The number of homes available for sale is very different in some cities.
In Melbourne total listings are – 1.2% lower than a year ago, in Brisbane they are -2.8% lower, in Hobart they are down -12.2% and in Canberra they are -3.1% lower.
The lower inventory levels imply less stock to choose from for buyers and consequently stronger selling conditions compared with a year ago.
The higher stock levels that are now evident in Sydney, as well as Perth and Darwin, suggest buyers have more homes to choose from and vendors may need to be more flexible in their pricing expectations.
Auction markets have shown stronger than expected results so far in 2016, albeit volumes are lower than the corresponding period a year ago.
While the second half of 2015 was characterised by lower auction clearance rates, for the last four consecutive weeks, clearance rates have been well above 70% in Sydney and Melbourne.
Sydney hasn’t had four successive weeks with clearance rates above 70% since late September last year and in Melbourne it hasn’t occurred since mid-October of last year.
Auction markets do show seasonal strength at the beginning of the year, so it will be interesting to see if the high clearance rates can persist across larger auction volumes through March and April.
Overall, the latest results from CoreLogic RP Data provide further evidence of a controlled moderation in the pace of home value appreciation.
With the Reserve Bank meeting today to deliberate on interest rates, the moderating trend in the pace of home value growth is likely to be a welcome development in the housing market.
In all likelihood, the Reserve Bank will be paying more attention to labour market conditions, and the global economic outlook rather than the 0.5% rise in home values over the month.