Home values hit record highs!
The latest figures from RP Data show capital city home values are now sitting at record highs, sky rocketing 15.6% in Sydney and 11.6% in Melbourne in the year to March.
There’s also been growth across Australia’s other capital cities, with values rising by:
- 4.8% in Brisbane
- 4.7% in Perth
- 4.6% in Adelaide
- 3.8% in Darwin
- 1.7% in Canberra
- 0.9% in Hobart
Houses have performed better than units in all cities except Perth, Hobart and Canberra
RP Data figures show Sydney home values are 15.8% higher than their previous peak. In Melbourne they are 4.7% above their peak, while in Perth and Canberra the figures are 2.9% and 1.2% consecutively.
While the figures above look great for anyone looking to get their home onto the market there not great for those looking to enter the market.
“Sellers are the major benefactors of the current housing conditions,” says RP Data Senior Research Analyst Cameron Kusher.
“The market is currently experiencing conditions whereby the number of properties available for sale is lower than a year ago, vendor discounting has improved and properties are typically selling in a relatively short period of time.”
What’s happening with rents?
Home values are growing faster than rents, according to the RP Data figures, which means rental yields are easing.
In the year to March, capital city rental rates rose 2.3% for houses and 3.2% for units – well below the five-year average of 3.9% for houses and 4.1% for units.
“With growth in home values much stronger than rental growth, it is reasonable to expect a further deterioration of rental yields over the coming months, particularly in Sydney, Melbourne and to a lesser degree Perth,” Kusher says.
How does it affect investors?
Kusher says markets vary from city to city and region to region.
He says up-graders and investors are driving the market, encouraged by interest rates sitting at historic lows.
“From an investors’ perspective the best opportunity to enter the Sydney, Melbourne or Perth markets has well and truly passed especially considering the strong value growth over the past year and now the falling rental yields,” Kusher says.
“It will be interesting the see whether investors start to turn their attention away from these cities and towards higher yielding markets that are yet to record any significant value growth, such as Brisbane and perhaps Adelaide and Darwin.”
What’s going to affect the market?
While we are enjoying low interest rates at the moment, Kusher believes they could start to head north if home values continue to rise at the current pace.
He also believes a jump in the unemployment rate could take the steam out of the housing market.
“If home owners start to suffer widespread job losses or potential buyers become concerned about job security, this will potentially result in an increase in arrears rates and would likely dampen housing market activity.
“Of course, if interest rates were to increase this may extinguish some of the current housing market exuberance.”
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