The value of Australia’s housing market has hit $6 trillion after house prices increased by almost 3% in July.
CoreLogic RP Data’s Home Value Index reveals that combined capital city house prices climbed 2.8% over the month of July, bringing the annual growth to 11.1% over the year to July.
According to CoreLogic RP Data’s head of research Tim Lawless, the growth, together with new stock additions to the market, was enough to push the aggregated national value of all dwellings past the $6 trillion mark. This has increased by just over half a trillion dollars in the past twelve months alone.
“Twelve months ago, CoreLogic RP Data estimated that the gross value of the total residential property asset class was $5.5 trillion. In July 2015 our estimates have now reached $6 trillion as a result of value growth and dwelling construction,” Lawless said.
“Based on APRA data through to March, approximately $1.3 trillion of bank debt remains outstanding against the asset class. Taking into account housing debt from the non-bank sector as well suggests that the overall debt to valuation ratio across the national housing portfolio is likely to be around the mid 20% mark.”
However, Lawless says the growth in the housing market has been two-tiered.
“To date, the capital cities have seen remarkable differences over the growth cycle which broadly commenced at the end of May 2012 and since that time dwelling values across our combined capitals index have increased by 30.4%.
“Sydney values are 47.9% higher over the current cycle and Melbourne values are 32.1% higher while every other capital city has seen growth of less than 13% over the same period. This highlights the extent to which the Sydney and Melbourne markets have outperformed other markets over the past three years.”
In fact, many capital cities have experienced a correction phase over the last 12 months. While Sydney recorded its highest annual rate of growth since 2002, with house prices up 18.4% in the year to July, Darwin house prices have dropped 5.3% while Perth prices are down 0.3%.
Melbourne house prices outpaced Sydney over July, increasing by 4.9%. Over the year to July, Melbourne prices increased by11.5%.
According to Lawless, the strongest growth conditions outside of Sydney and Melbourne have been in Brisbane where dwelling values were 3.9% higher over the year.
“While Sydney and Melbourne values continue to boom, the next best performing city, Brisbane, has seen dwelling values rise by just 3.9% over the past twelve months. Based on the median dwelling price, Sydney prices are now 72% higher than Brisbane’s and Melbourne’s are 24% higher,” he said.