The housing run continues
ACCORDING to the RP Data-Rismark Home Value Index, Australia posted a 1.2 per cent rise in capital city dwelling values over the month of January with a 2.7 per cent rise for the three months to end of January.
The latest Index results revealed that capital city dwelling values increased by 13.2 per cent since the beginning of the current growth cycle back in June 2012 and are now 4.8 per cent higher than their previous peak in October 2010.
RP Data research director Tim Lawless said capital city housing markets continue to be a mixed bag. ‘‘Sydney and Melbourne were the clear drivers for capital gains over the past year, with values up 13.4 per cent and 11.9 per cent respectively over the twelve months ending January 2014.
Excluding Perth, every other capital city has recorded growth of less than 5 per cent over the past year.’’
He said these latest housing market results are likely to dampen further speculation around a cut to interest rates over the short to medium term.
‘‘Together with the higher than expected inflation reading and a lower Aussie dollar, the sustained growth in dwelling values is another factor the RBA is likely to consider when deliberating on any movement in the cash rate,’’ Mr Lawless said.
The results confirmed that Sydney and Melbourne are now well advanced in their growth cycle.
Mr Lawless is expecting the current exuberant conditions to wind down over the coming year due to the very low yield environment, increasing affordability constraints and higher levels of housing supply impacting the market.
Melbourne, where values were up 3.4 per cent over the three months ending January 2014, continues to offer an upside surprise with strong capital gains recorded despite the city showing the lowest rental yields of any other capital and a lift in supply across the inner city and outer fringe housing markets. Local dwelling values also surpassed their previous 2010 market peak and are now 2.6 per cent higher than the previous record highs.
Rismark’s CEO, Ben Skilbeck, says that ‘‘while a moderation in growth is expected for Melbourne and, to a lesser extent, Sydney, strong population growth, an increasing appetite for housing credit and positive consumer sentiment means we are unlikely to see price declines in the near term. Growth in outstanding housing borrowings has increased meaningfully from its lows.
‘‘Most noticeable is investor borrowing which for the calendar year 2013 grew by 7 per cent compared to 3 per cent in 2011.
‘‘While we are yet to observe a significant increase in owner occupier borrowing, lending commitments to this segment for the month of November, the latest available, are 19% higher than the same time last year.’’
Meanwhile, building industry confidence has remained steady during the three months to December after the strong improvement last quarter, according to Master Builders latest Survey of Industry Conditions for the December 2013 quarter.
Deputy executive director Paul Bidwell said that while trading conditions in the residential and commercial sectors are still far from positive, the latest survey results reflect a strong upturn during the December quarter, particularly in the residential sector.
‘‘Master Builders believes the hold in confidence and upturn in the residential sector come on the back of strong building approvals and housing finance data during November and are further evidence that the recovery in housing is underway,’’ Mr Bidwell said.