CoreLogic says that capital city dwelling values shift half a percent higher in October 2016 based on their Home Value Index. They have reached a new record high for the month, with values rising across six of the eight capitals.
Apart from Adelaide (-1.3%), Hobart (-2.8%) and Perth (-1.5%), every capital city recorded a rise in dwelling values over the past three months, with the Canberra housing market recording the largest increase in values after a 5.6% quarterly rise.
Sydney continued as the stand out based on annual capital gains, recording the largest year-on-year increase; dwelling values are now 10.6% higher over the past 12 months. Detached houses (+10.9%) are showing only a slightly higher rate of capital gain compared with units (+9.1%) across Sydney, highlighting the healthier supply/demand dynamic that exists across the Sydney region for higher density housing.
The divergence in performance between houses and units is most clearly evident in Melbourne and Brisbane. The annual rate of capital gains in Melbourne remains strong at 9.1%, however there is a substantial difference in growth rates between houses and units, with house values up 9.6% compared with a 5.2% increase in unit values over the past year. Brisbane’s housing market has shown a larger capital gain spread, with house values up 4.7% compared with a 1.4% fall in unit values over the year.
According to CoreLogic, another sign of market strength can be seen in auction results. In fact, over the past two months, clearance rates across Sydney have dipped below 80% only once. A year ago auction clearance rates were consistently trending around the mid 60% range, albeit on volumes that were about 20% lower than last year.
While dwelling values have broadly risen during October, rental yields in Sydney and Melbourne remain depressed, with gross yields at record lows. The typical Sydney and Melbourne house is now providing a gross rental return of just 2.8%. Taking into consideration holdings costs, expenses and vacancy, the net rental yield for houses is likely to be closer to 2% in these markets. Markets where value growth hasn’t been as strong are seeing healthier yield profiles, with Hobart demonstrating the highest gross rental yields of any capital city.
