Sydney market rebound catalyst for jump in May dwelling values

Dwelling values across the combined capital cities of Australia rose by 1.6% in May with house values driving most of the capital gains, up 1.8% compared with a 0.1% rise in unit values. 28803914_l

The strong May numbers were largely the result of a surge in Sydney dwelling values which were up 3.1% over the month.

A rise of more than 1% month-on-month was also recorded in Melbourne (1.6%), Canberra (2.5%) and Hobart (2.2%).

Perth was the only city to record a fall in dwelling values over the month, down 2.7%. Core1

Core2After such a strong performance across the Sydney housing market, the annual rate of growth has moved substantially higher to reach 13.1% per annum after reaching a recent low point of 7.4% per annum growth over the 12 months ending March 2016.

Despite Sydney’s bounce in the trend rate of growth, Melbourne’s housing market is still recording the highest annual rate of capital gain at 13.9%.

Perth and Darwin remain the only markets to record an annual decline in home values.

Perth dwelling values are down 4.2% over the past year and have recorded a peak to current fall of 6.7%. Similarly, Darwin dwelling values fell by 3.5% over the past year and are down 5.5% since peaking two years ago.Core3

The current growth cycle has been running for four years now.

After capital city dwelling values fell by 7.4% between October 2010 and May 2012, values have since risen by 36.6% over the growth cycle to date.  

The largest capital gains over the cycle to date have been in Sydney where dwelling values are 57.5% higher followed by Melbourne with a 39.4% capital gain since values started rising.

The third strongest performance has been in Brisbane at 18.5%.

The rebound in the rate of capital gain during 2016 is supported by other measurements in the market.

Auction clearance rates across the combined capital cities have remained stable and hovered around the high 60% to low 70% range since February this year.

Sydney clearance rates remain firm, sitting at around the mid 70% mark over the past three weeks while Melbourne clearance rates now sit in the early 70% range.Core4

The high uses vs units, combined capital cities rate of auction clearance has demonstrated a remarkable bounce back after tracking below 60% during December with Sydney’s auction market recording a clearance rate as low as 52.9% in December.

The number of events across CoreLogic’s valuation platforms, which account for more than 95% of all bank valuation instructions, are up 6.7% over the past 28 days signalling an increase in
mortgage related activity.Core5

The extent to which investors are fuelling the latest surge in Sydney home values is difficult to quantify, however housing finance data to March shows investors, as a proportion of all new mortgage commitments, have been trending higher since reaching a recent trough in November last year at 42.9%.

The March data shows investors now comprise of 47.6% of all new mortgage commitments which is the highest proportional reading since August last year.

Anecdotal evidence suggests investor numbers may have increased further from this time, with some lenders reversing the tighter lending requirements that were previously in place for investment purposes as growth in investor related credit tracks well under the APRA speed limit of 10% per annum.

The latest housing credit growth figures show that investor housing credit has advanced by just 7.1% over the past year which is its slowest annual growth rate since November 2013.

Based on this, lenders now have scope to increase lending to investors.

Lower mortgage rates are likely to have a positive effect on consumer confidence and housing market conditions, with the standard variable mortgage rate now at its lowest level since 1968. 48226298_l

While to date, capital city dwelling values increased by 5.0% this calendar year, weekly rents have seen virtually no movement, increasing by just 0.7% over the first five months of the year.

The effect of strong capital gains with little rental movement is a further compression of gross rental yields which fell to a new record low during May.

The gross rental yield for dwellings across the combined capital cities is now 3.4%, with Melbourne continuing to show the lowest gross yield profile for houses at 2.9% while Sydney has taken over from Melbourne to show the lowest gross yield profile for units at 4.0%.

While the annual pace of growth has clearly reversed direction on the latest few months of data, the trend is still relatively fresh and may be short-lived.

Despite lower mortgage rates in May, lending conditions are tighter now than they were a year ago.

Recent data from APRA highlights that interest only lending is now at its lowest level since March 2013 and new mortgages with an LVR (loan to value ratio) higher than 90% are at the lowest reading since March 2011.

With the federal election only a month away, we can expect housing to remain in the spotlight more than usual.

Want more of this type of information?

Tim Lawless


Tim heads up the Core Logic RP Data research and analytics team, analysing real estate markets, demographics and economic trends across Australia. Visit

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