A two-speed housing market has emerged as Sydney and Melbourne house prices continue to rise despite national house price growth steadying.
National house prices across the combined capital cities rose just 0.5% in June, following a 1.6% rise in May. Capital city house prices are now 8.3% above where they were a year ago.
However, despite the slowdown on a national level, Sydney and Melbourne have both recorded solid gains over the months, with house price increases of 1.2% and 0.8%, respectively.
According to CoreLogic Asia Pacific research director, Tim Lawless, home values in Sydney have been rising for four years, and have increased by a cumulative 59% over this growth cycle. Melbourne prices have moved 41% higher over the growth cycle to date.
However, the standout performer in the June results was the Hobart property market, which outpaced both Sydney and Melbourne with a 1.8% increase in house prices.
Lawless says this is likely because Hobart is coming from a sustained period of underperformance in its property market.
“While the higher rates of capital gains in Sydney and Melbourne can be tied back to strong economic conditions, and high rates of population growth, the same cannot be said for Hobart where economic conditions and migration rates are gradually improving from a low base.
“The strength in the Hobart market comes after a long period of underperformance, where home values in the city increased by only 1.4% per annum over the past ten years. Potentially, the Hobart housing market is being fuelled by the sheer affordability of housing and a renewed trend towards Melbourne and Sydney buyers unlocking their equity to make lifestyle housing purchases.”
All other capital city housing markets recorded a decline in home values in June. Monthly declines of more than 1% were recorded in Darwin (-1.6%), Adelaide (-1.3%) and Canberra (-1.1%), while the falls in Brisbane (-0.1%) and Perth (-0.8%) were less severe.
Over the first six months of the year, capital city dwelling values have moved 5.5% higher during 2016, with the most substantial capital gains located in Sydney (8.9%), Hobart (8.5%) and Melbourne (5.8%).
The only two capital cities to record a reduction in dwelling values for the year to date have been Perth and Darwin where home values have been drifting lower since 2014. Perth dwelling values have reduced by 3.9% over the first half of 2016, taking dwelling values 7.4% lower since the market peaked in December 2014.
Darwin dwelling values are down by 0.2% over the first half of 2016 and have fallen by a cumulative 6.9% since the recent peak in May 2014.
“Housing market conditions in both Perth and Darwin are suffering from reduced housing demand resulting from a sharp downturn in migration and weaker employment opportunities,” Lawless said.
“Rental rates have also fallen substantially in both cities, highlighting that lower housing demand is not confined to home buyers but also renters.”