The capital city housing market performance was diverse over the first month of Spring.
Sydney value growth was flattening and dwelling values down across three of the capital cities according to the September CoreLogic RP Data Home Value Index results.
The first month of Spring provided mixed results across the capital city housing markets with the headline results showing a 0.9 per cent rise in capital city dwelling values over the month, and a 4.0 per cent increase over the September quarter.
Across the capital cities, the month-on-month results ranged from a 2.4 per cent rise in Melbourne dwelling values, through to a 1.9 per cent fall in values across the Hobart market.
Australia’s largest and most expensive capital city housing market, Sydney, posted a month-on-month gain of just 0.1 per cent in September.
Index results as at September 30, 2015
During the September quarter, half of Australia’s capital cities posted a decline in dwelling values with Hobart down 2.0 per cent over the three months.
Adelaide values slipped by 1.6 per cent, Perth by 0.7 per cent, and Canberra values were down 0.4 per cent.
The most substantial capital gains over the quarter were achieved in Melbourne where dwelling values were up by 7.4 per cent, followed by Sydney (+4.6 per cent), Brisbane (+1.9 per cent) and Darwin where values were up by 0.4 per cent.
The flat growth rate in Sydney comes after dwelling values increased by 16.7 per cent over the past twelve months and are 49.6 per cent higher over the growth cycle to date.
The slower month-on-month reading across the Sydney market comes at a time when auction clearance rates have slipped to the low 70 per cent range from week-to-week and the number of advertised properties has risen.
Vendors are still enjoying strong selling conditions, but it looks like buyers are slowly regaining some leverage in what has been a very hot market.
While half of Australia’s capital cities have seen values rise over the past quarter and year, the other half did not fare as well
In Darwin, dwelling values fell by 3.9 per cent over the twelve months to the end of September, while in Perth, values were 0.9 per cent lower over the year.
Adelaide home values dropped by 0.3 per cent, and Hobart values are 0.2 per cent lower.
Weakening labour markets, slower population growth and less demand for housing is placing downwards pressure on prices to differing degrees across these markets.
Looking at which sector of the housing market is driving the highest capital gains, across the combined capital cities it has been the most expensive quartile of the market where growth has been the most substantial.
Across the combined capitals, the top quartile of dwellings based on value has recorded growth of 12.3 per cent over the past twelve months, while the most affordable end of the market has recorded a lower growth rate of 8.5 per cent.
This trend holds true across Sydney and Melbourne, however in Brisbane, Adelaide and Perth it is actually the most affordable end of the housing market that has recorded the best results.
CoreLogic RP Data’s analysis of houses versus apartments reveals some substantial differences in market performances across the capital cities.
At a capital city level over the quarter, the results don’t show a great deal of difference with house values up 4.0 per cent and unit values rising by a slightly lower 3.9 per cent.
Over the year there has been a stronger result for detached housing compared with apartments
Capital city house values are up 11.6 per cent over the past twelve months compared with a 7.3 per cent rise in unit values.
The Melbourne market shows the most material difference between product types with house values up 15.6 per cent over the past year compared with a 3.7 per cent rise in unit values.
Similarly, in Sydney, house values are 17.6 per cent higher and unit values have risen by a lower annual rate of 12.6 per cent.
The only capital city where apartments have outperformed detached houses over the past twelve months has been in Hobart where apartments comprise only around one fifth of dwelling sales.
Across the combined capitals cities, the majority of dwelling approvals have been for units as opposed to houses which is potentially limiting the pace of capital gains across this segment of the market.
Turning the focus to rental markets and rental yields, the trend towards lower gross rental yields has continued over the September quarter, with weekly rents slipping 0.8 per cent lower for houses across the combined capital cities and remaining flat for units.
While dwelling values continued to rise over the September quarter, at least across the combined capitals, rental rates slipped lower for houses and remained steady for units which has pushed gross rental yields even lower.
Gross rental yields are at a record low across Sydney, Melbourne and Canberra
The lowest gross rental yields can be found in Melbourne where the typical house is now providing a gross return of just 2.9 per cent, and units are providing a gross return of 4.1 per cent.
Similarly, in Sydney, gross yields are also at a record low with houses providing a gross return of 3.1 per cent and units yielding 4.1 per cent.
We’re also seeing relatively weak rental conditions across the other capital cities, however capital gains haven’t been high enough to push gross rental yields substantially lower.
With the first month of Spring behind us, it is clear that housing market conditions are being tested, particularly in Sydney.
The number of auctions held over the month of September was 31 per cent higher compared with September 2014 and new listing numbers are ramping up at a faster rate than last year as well.
The fact that clearance rates have held above 70 per cent in Sydney and Melbourne in the face of substantially higher auction numbers suggests that selling conditions remain strong despite the softer growth figure in Sydney over the month.
While clearance rates and auction volumes provide a very timely view of the market highlights that it’s important to remember auctions represent less than 25 per cent of all capital city sales.
Sydney, Melbourne and Canberra are by far the largest auction markets, where, over the year to date, auctions have comprised approximately 35 per cent of all sales.
Importantly, the majority of listings and sales aren’t by auction.
Private treaty metrics such as average selling time and the rate of vendor discounting are also showing relatively resilient results with Sydney dwellings selling in just 26 days on average and Melbourne dwellings selling in an average of 32 days.
The longest selling times can be found in Darwin, Perth and Hobart where the typical dwelling is taking 73, 67 and 65 days to sell.