Capital city spring property update

Spring has sprung and so have several Australian capital city residential property markets, albeit at a more modest rate than in previous quarters, according to leading property data research house CoreLogic.

Capital dwelling values rose by 0.7 per cent in the third quarter of the year, according to the September results of the CoreLogic Home Value Index. But it’s a tale of several cities across the property sector.

Two capitals recorded drops – Perth by 1.3 per cent and Darwin by 4 per cent – while elsewhere values increased by between 0.2 per cent (Sydney) and 3.4 per cent (Hobart).

Over the 12 months to September 2017, average dwelling values across all capital cities increased by 8.5 per cent. A buoyant market in Hobart saw values up by 14.3 per cent, the city’s fastest rate of growth in more than a decade. While Sydney and Melbourne recorded double-digit increases of 10.5 per cent and 12.1 per cent respectively.

In Canberra and Adelaide, value increases were more modest at 7.8 per cent and 5 per cent respectively, while in Brisbane they edged up by 2.9 per cent.

Values in Perth and Darwin decreased by 2.9 per cent and 4.7 per cent respectively; part of a pattern of ongoing falls in these cities.

Mercury rising?

The question is whether capital city prices will sizzle as the mercury continues to rise through the summer of 2017.

It’s unlikely, according to CoreLogic’s head of research Cameron Kusher. Rather, he’s expecting dwelling value growth to continue to slow and possibly even decline moderately, in the case of the white-hot Sydney market.

Such a development would likely be welcomed heartily by policymakers such as the Reserve Bank of Australia and the Australian Prudential Regulation Authority, Kusher notes, as well as hard-pressed buyers who’ve been contending with seven-figure median house prices in recent years.

“The combination of more stock for sale, the rationing of credit to investors who have been extremely active in Sydney and the lack of affordable housing is likely to impact on growth going forward,” he writes.

Melbourne may experience the same sort of easing off but to a lesser degree, thanks to a larger supply of affordable housing and less investor activity. Adelaide may continue to see moderate growth while the southern migration surge into south-east Queensland could give Brisbane’s rate of value growth a fillip.

Smaller state shifts

Values have continued to fall in Perth and Darwin over the past year, although Kusher suggests the former may be close to bottom.

Not so in Darwin, where heightened levels of new dwellings hitting the market may send prices further south this summer.

By contrast, value growth should continue to rise in Hobart and Canberra, courtesy of low levels of housing stock and improving local economies.

“Hobart, in particular, is also benefitting from being a significantly more affordable location to purchase a home than all other capital cities – which is likely contributing to its capital city leading rate of value growth over the past year,” Kusher writes.

As ever, it’s an especially active market at this time of year.