The recovery continues with a second place shake up
It’s been a positive quarter in the three months to May 31, albeit a period of slight to modest growth for most capital cities and the combined regions.
CoreLogic’s Home Value Index (HVI) rose 1.9 per cent nationally over the quarter, with Perth taking the top spot for growth after a 6.1 per cent increase in the median dwelling value. The West Australian capital also earns the gong for the best-performing city annually with a 22 per cent jump since May last year to a median of $736,649.
Melbourne, however, was the only capital to record negative dwelling growth with a -0.2 per cent move over the quarter taking the 12-month change to 1.8 per cent and a median of $780,437.
A second place shake up
Perhaps one of the most intriguing revelations of this month’s HVI was that there has been yet another changing of the guard on the totem pole of Australia’s priciest cities. As usual, Sydney still sits far out front with a median of $1.156 million. Canberra had been in the runner up position, but after a bumper quarter of 3.9 per cent growth (an annual movement of 16.3 per cent) Brisbane has taken the silver with a median value of $843,231. According to CoreLogic figures, the Queensland capital hasn’t held this second position since 1997. Coming into the pandemic Melbourne’s median dwelling value held around a 37 per cent premium over Brisbane’s, and the ACT’s median was approximately 24 per cent higher.
In the three months to May, the nation’s capital moved into bronze place on the price podium with a 0.7 per cent rise over the quarter to a median of $840,100.
Tim Lawless, CoreLogic research director, said extremely low levels of supply across the strongest markets provide the best explanation for the difference in growth rates. “The number of properties available for sale in Perth and Adelaide remain more than -40 per cent below the five-year average for this time of the year while Brisbane listings are -34 per cent below average,” Mr Lawless said.
“Inventory levels in these markets remain well below average despite vendor activity lifting relative to this time last year. Fresh listings are being absorbed rapidly by market demand, keeping stock levels low and upwards pressure on prices.”
Travelling the peaks and troughs
Sydney spent the last quarter in recovery mode as values increased by 1.2 per cent. In May, the HVI revealed the improvement was nominal, equalling the earlier record high set in January 2022. After that price peak, the Harbour City’s dwelling values dropped by a dramatic -12.4 per cent, hitting a trough approximately a year later. The local market has since picked up by 14.1 per cent through the cycle to-date.
Since the onset of Covid to May this year, Sydney has seen a 27.2 per cent rise in its median dwelling value.
Hobart, however, is the capital sitting the furthest off its pandemic-induced peak. Between its high in May 2022, the Tasmanian city is still -11.5 per cent down recording a $655,170 dwelling median. Despite the significant decrease, Hobart is still up 28.4 per cent on its pre-Covid median. Although CoreLogic places Melbourne, Brisbane, Adelaide, and Perth back at their peak positions for the current cycle, no capital has surpassed its peak as of yet.
High end home growth in hiatus
Despite a handful of multimillion dollar trophy homes selling over the past three months, CoreLogic data has shown that upper quartile home values (those sold in the top 25 per cent of prices) are at their lowest rate of growth in 12 months. This phenomenon is occurring in all capital cities, except Darwin, demonstrating stronger conditions in the more affordable price points.
“After recording a higher rate of gain through the early months of the growth cycle, conditions have faded across the upper quartile as borrowing capacity reduced and affordability constraints deflected demand towards middle-and-lower-priced properties,” Mr Lawless said.
Across the combined capitals index, upper quartile dwelling values were up 6.7 per cent annually compared with a 13.4 per cent gain across the lower quartile of the market.
Prices moving forward
Unsurprisingly, the interest rate status and the imbalance in the supply and demand equation, are being tipped as the catalysts for future home price growth.
Eleanor Creagh, senior economist with PropTrack from REA Group, said in the May Home Price Index that with housing supply not keeping up with demand, national home values have now cycled through 17 consecutive months of growth according to their data.i
“Despite a rise in the number of homes for sale this year, strong population growth, tight rental markets, and home equity gains continue to bolster strong demand. Meanwhile, building activity remains challenged by capacity constraints and higher costs, with consequent tight housing supply pushing prices and rents higher,” she explained.
“This mismatch between supply and demand is continuing to offset the higher interest rate environment. Further, current interest rate stability has sustained buyer and seller confidence, while ongoing home price rises are likely incentivising many to overcome affordability challenges and transact with the expectation of further growth.
Although, it is likely the pace of growth will continue slowing through the seasonally quieter winter period, particularly with interest rate cut expectations pushed out to late 2025.”
Dwelling values over the quarter
Melbourne
The Victorian capital posted a -0.2 per cent quarterly move according to CoreLogic figures taking the city’s median dwelling price to $780,000. Investors should take note that the gross rental yield figure for Melbourne now sits at 3.6 per cent.
Sydney
In the three months to May’s end, Sydney experienced a subtle dwelling value change of 1.2 per cent resulting in a median of $1.156 million. The gross rental yield for the Harbour City is currently the lowest in of the capitals at 3.1 per cent.
Brisbane
Gaining momentum, the Queensland capital has taken the second most expensive spot for dwelling values at $843,231 after a quarterly rise of 3.9 per cent. Brisbane has recorded a gross rental yield of 3.8 per cent.
Canberra
Knocked off its second spot, the national capital had a modest 0.7 per cent increase during the quarter with the median now sitting at $840,100. For Canberra, the gross rental yield is 4.1 per cent.
Perth
By far the best-performing capital over the quarter, Perth jumped 6.1 per cent in three months taking its medium to $736,649. At 4.5 per cent, Perth has the second most impressive gross rental yield in the country, only behind Darwin at 6.5 per cent.
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Note: all figures in the city snapshots are sourced from: CoreLogic’s national Home Value Index (June 2024)
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