The CoreLogic July Home Value Index results reported a 0.8 per cent rise over the month, taking capital city dwelling values 6.3 per cent higher over the first seven months of the year.
The first month of the new financial year saw another rise in capital city dwelling values, with the CoreLogic hedonic eight capital city aggregate index rising 0.8 per cent over the month to reach a new record high.
While values are still rising, four of Australia’s eight capital cities recorded a fall in dwelling values over the month.
Simultaneously, the rate of growth across the combined capitals aggregate index slipped back a notch after bouncing higher in April and May.
The annual rate of growth, which hit a recent peak at 11.1 per cent across the combined capitals index in October last year, is now tracking at 6.1 per cent; the slowest annual rate of appreciation since September 2013.
July marks the 50th month of the combined capitals growth cycle, which commenced in June 2012.
Over the cycle to date, capital city dwelling values have risen by 38.3 per cent.
The recent moderation in the rate of capital gains should be viewed as a positive sign that growth in dwelling values may be returning to more sustainable levels.
However, the growth trend rate is still tracking considerably faster than income growth resulting in a deterioration of housing affordability.
The erosion in housing affordability is likely to be one factor working to slow housing demand across price sensitive market segments.
The latest growth in dwelling values comes at a time when rental conditions remain soft.
Capital city rents were down again over the month to be 0.6 per cent lower over the past twelve months.
While low yields haven’t been enough to deter investors, if the pace of capital gains continues to trend lower, low rental yields are likely to lead to financing challenges due to tighter serviceability requirements and the impact on cash flow, not to mention a potential increase in rental supply resulting in higher vacancy rates.
It may be too early to gauge the impact of the July election on dwelling values, however there has been no discernable uplift in the data flows across CoreLogic platforms, which account for the majority of lenders valuation instructions and real estate agent activity.
The number of mortgage related valuations were approximately 4% lower over the month, suggesting a further slowdown in housing credit during July.
Additionally, real estate agents were less active on CoreLogic platforms over the month, indicating fewer properties were being prepared for sale compared with June.
As the housing market moves through its fourth year of growth, several other measures are potentially indicating that buyers may be starting to gain some leverage in the market.
The number of dwelling transactions across the capital cities has been trending lower, with total dwelling sales over the most recent three month period now tracking 17.9 per cent lower than at the same time a year ago.
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