The July 2017 CoreLogic Home Value Index results recorded a 1.5% rise in dwelling values across the combined capital cities for the month.
Most individual capital cities recorded a rise, however, a 3.1% gain in Melbourne was a significant driver for the strong monthly result across the combined capitals.
The recent bounce in capital gains may be partially due to a recovery from the seasonal slump in values recorded in April and May.
However, other factors, such as stamp duty concessions for first home buyers in New South Wales and Victoria, may also be having a positive impact on market demand.
It’s still too early to measure the effect of first home buyer incentives, which went live on July 1st.
However historically, the first time buyer segment has been very responsive to stimulus measures.
Despite the higher month-on-month capital gains in June and July, the quarterly trend rate of growth has clearly reduced.
The rolling quarterly pace of capital gains across the combined capitals has fallen from 3.6% in February earlier this year to reach 2.2% at the end of July.
Gradually responding to higher mortgage rates, tighter credit policies and affordability challenges, with the quarterly trend in capital gains moderating relative to early 2017.
The rise in dwelling values across the combined capitals over the month has not been matched by a rise in weekly rental rates, which means gross rental yields have slipped lower over the month.
Gross yields are once again at new record lows across the combined capital cities, driven by further falls in yields across both Melbourne and Sydney.
While the housing market has slowed from the recent highs of late 2016 and early 2017, the trend rate of growth remains robust.
I don’t think there is any one factor causing the market to lose steam, rather it is the culmination of several factors working together.
Higher mortgage rates and tighter credit policies have dented investor appetite.
This is clear from the RBA’s monthly credit aggregates which show investment related housing credit growth has consistently slowed from late last year.
At the end of June, discounted variable mortgage rates were up 15 basis points for owner occupiers and were 35 basis points higher for investors.
CoreLogic confirmed that advertised stock levels have begun to rise in some cities, particularly in Sydney where total listing numbers are now 14% higher than at the same time a year ago.
More choice for buyers implies less urgency which may be easing upward pressure on prices.
Affordability challenges are also likely to be impacting buyer demand across Sydney, where the median house price remains over $1 million.
Considering these factors, the expectation is for the pace of capital gains to continue to ease through 2017, particularly in Sydney, and to a lesser degree Melbourne, where value growth has been most extreme over the past five years
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