Great news for those interested in property investment and another blow for the property bears (yes they’re still out there waiting for the sky to fall) – capital city dwelling values rose a further 1.6 per cent in July according to RPData taking the cumulative recovery in residential home values to 6.5 per cent since the market bottomed out in May last year.
The July results also take the rolling quarterly change in capital city dwelling values to +2.3 per cent over the three months ending July and values are 4.9 per cent higher over the past twelve months.
According to RP Data research director Tim Lawless, despite the strong headline, the market remains somewhat of a mixed bag.
“The housing market is being buoyed by very positive conditions in Sydney, Perth and to a lesser extent Melbourne, with residential values in these cities now 3.7 per cent, 4.4 per cent and 2.4 per cent respectively higher over the past three months alone.
At the other end of the scale you have cities like Adelaide, Brisbane and more recently Darwin where conditions are more sedate with dwelling values slipping lower over the past quarter.”
“By including rental yields in our assessment of the housing market, some clarity is provided as to why investors are becoming so active.”
“The RP Data-Rismark Accumulation Index, which factors in both capital gains and gross rental yields, is up 9.4 per cent over the past year.
[sam id=31 codes=’true’] As noted by RBA Governor Glenn Stevens earlier this week, with an easing in monetary policy one of the expected and intended effects will be that people start to shift their portfolios away from the less risky assets such as cash and in the direction of holding equities and physical assets such as property.
Each of the vendor metrics published by RP Data and Rismark International has continued to strengthen over the month.
According to Mr Lawless, a typical capital city dwelling is selling in just 45 days compared with 59 days at the same time a year ago. Vendors are discounting their prices less and clearance rates remain close to 80 per cent in Sydney and slightly lower in Melbourne.
“With the housing market once again showing solid capital gains and rents also rising, the issue of housing affordability is likely to begin attracting more attention.
“The recent housing market correction which bottomed in May 2012, where values were down 7.4 per cent from peak to trough across the combined capital cities, together with mortgage rates moving to historically low levels, delivered substantial affordability improvements for Australian housing. However, with Sydney, Perth and Canberra values now back at record high levels and some other capital cities not far off their previous peaks, there are likely to be a growing number of households who find it challenging to enter the housing market,”
Rismark CEO Ben Skilbeck added,
“While the highly anticipated interest rate cuts in August will further act to improve housing affordability, if these cuts do eventuate they will likely spur further house price appreciation making the deposit requirements for first home buyers more challenging.”
The RP Data Rismark results also show that after some time in the doldrums, the more expensive upper quartile of the market is continuing to underperform the other broader priced segments of the housing market.
According to Mr Skilbeck, for the 12 months ended July 2013, the mid-market achieved 1.4 times the growth of the upper quartile.
“While the mid-market has largely recovered its peak to trough declines, the upper market still needs to add about 4% before it can claim the same.”
Why not join me and a group of property and tax experts at my upcoming Property Market and Economic Updates that I’ll be conducting in 4 states over the next month or so.
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