Melbourne gains driving national property market

Rapid population growth and higher mortgage rates continue to be important factors behind the latest housing trends

Melbourne gains driving national property market



Strong growth in the Melbourne property market is behind higher house prices nationwide, according to new data from property research firm CoreLogic.

The July 2017 CoreLogic Hedonic Home Value Index recorded a 1.5% increase in dwelling values across the combined capital cities for the month. While most capitals experienced an uptick, Melbourne was ahead of the pack with a 3.1% gain.
Region Change in dwelling values
Month Quarter Yearly
Sydney 1.4% 2.2% 12.4%
Melbourne 3.1% 4.1% 15.9%
Brisbane -0.6% -0.7% 2.2%
Adelaide 1.1% 0.1% 2.1%
Perth -1.3% -0.3% -2.1%
Hobart 0.9% -1.4% 6.5%
Darwin -1.2% -6.8% -2.1%
Canberra 2.4% 4.9% 12.9%
Combined capitals 1.5% 2.2% 10.5%
Rest of state 0.2% 0.0% 5.4%

These results showed the diversity of housing market conditions across the country, said CoreLogic head of research Tim Lawless.

“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.”

While it was too early to predict the effect of the various first home buyer incentives introduced on 1 July, Lawless said that this segment was typically very responsive to these types of stimulus measures.

While month-on-month trends have picked up in the most recent months, there has been a noticeable slowdown in the quarterly figures. The combined capitals growth trend fell from 3.6% in February to 2.2% in July.

This quarterly slowdown was greatest in Australia’s hottest housing markets, falling from 5.0% in Sydney earlier this year to 2.2% at the end of last month. Likewise, Melbourne’s figures also dropped from 5.5% to 4.2% in the same time period.

Auction clearance rates in Sydney and Melbourne have also diverged with Sydney’s falling below 70% while Melbourne remains around 75%.

“Melbourne appears to be benefitting from consistently high population growth which is creating strong demand for housing, as well as consistently high jobs growth and more affordable housing options relative to Sydney,” Lawless said.

At the other end of the spectrum, Perth and Darwin have continued to see dwelling values slide over July. These trends take the cumulative decline to 10.2% in Perth and 14.5% in Darwin since both capital markets peaked in 2014.

“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,” Lawless said.

“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.”

Recent rate hikes, especially in the investment and interest-only space, are likely to further disincentivise some prospective buyers, he added.

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