Home prices across Australia are continuing to increase. According to CoreLogic Data, capital city dwelling values grew by 1.4% in February. Property experts suggest the rebound in property prices is due to greater investor activity after 2016 rate cuts. Before these cuts, dwelling price growth eased to an annual rate of just 6%.
Nationally, property prices rose by 11.7% over February. Canberra recorded the highest level of property growth at 3.2% over the month. Sydney followed Canberra at 2.6% with Melbourne at 1.5%. Hobart recorded a 1.0% increase. Although Darwin, Perth and Brisbane recorded a loss of -4.3%, -2.4% and -0.4% respectively.
Capital City Home Values at 28th Feb 2017
|City||% Change Month||% Change Quarter||% Change Year||Total Gross Returns||Median Dwelling Values|
Source: CoreLogic RP Data
CoreLogic state that the Australian housing market has witnessed 58-months of healthy growth. Expansion in the national market began occurring again in June 2012. Since this time, home prices have increased by 47.3%. Sydney values have risen by 74.9% since 2012 and Perth’s by 6.0%.
Both Sydney and Melbourne have remained at the top of the latest market cycle. Over the last 8-years, Sydney property values have doubled with a 104.5% gain. Melbourne, on the other hand, grew by 87.5%. The next best performing city was Canberra with a 37.4% rise.
Growth in capital gains is ideal for homeowners with substantial asset value growth boosting wealth. However, growth hinders younger generations, first home buyers and low-income families from entering the market as housing becomes unaffordable.
Affordability issues are the highest in Sydney, where dwelling prices are 8.5% greater than gross household income. Next, Melbourne follows closely behind with a 7.1% rise in the housing price to income ratio.
Median suburb values in Australian capitals continue to escalate. Consequently, the number of suburbs nationally with a median value of less than $480,000 dropped. In comparison, at the end of 2011, 53.3% of suburbs had a median value of less than $400,000. By the end of 2016, only 41.0% of suburbs had a median value of under $400,000.
In 2011 the percentage of homes with a median value of under $400,000 was as follows:
1% Darwin; and
By 2015, however, the proportion of suburbs under $400,000 had changed significantly.
0% Darwin; and
At present, record levels of household debt and a strengthening housing market keep rates on hold, along with low-level inflation. Levels of household debt to disposable income for the September 2016 quarter was 186.9%. Plus, the ratio of housing debt to disposable income was also high at 132.2%. These figures indicate why households are spending less and why the Australian economy is not showing signs of growth.
However, it’s also important to note that levels of housing assets to disposable income is extremely high. Currently, household assets to disposable income are at 885.7% and housing assets at 481.1%. Therefore, indicating that while debt is high, the value of the property securing that debt is also great.
Tags: Home Buying