RP Data: January News 2015

Capital city home values rise by 7.9% in 2014


CoreLogic RP Data Home Value Index Release

The December 2014 results of the CoreLogic RP Data Home Value Index saw combined capital city home values rise by 0.9% over the month to take the annual increase to 7.9%.

The CoreLogic RP Data Home Value Index showed that dwelling values across the combined capital cities increased by 0.9 per cent in December 2014. Throughout the month home values rose in all cities except for Darwin (-0.6%) and Canberra (-0.6%) while values were unchanged in Sydney.

Over the final quarter of 2014, capital city home values increased by 1.6 per cent, with Perth (+2.8%), Sydney (+2.3%) and Brisbane (+1.8%) recording the greatest quarterly gains, while values fell in Darwin (-1.7%) and Canberra (-3.4%). Despite the positive result across most cities, the annual rate of capital gain across Australia’s capital city housing market has continued to slow.

The capital gain on houses compared to units was higher, with house values gaining 8.4% over the calendar year compared with a 5.1% increase in unit values. According to Mr Kusher, detached housing remains in high demand despite the higher price point. He said we haven’t seen the same ramp up in building approvals for detached housing compared with multi unit dwelling approvals.

“Based on the median price across the combined capital cities, houses are attracting a $100,000 premium over apartments.”

“The slowing annual growth rate is further evidence that the housing market is losing some steam with combined capital city home values increasing by 9.8 per cent over the 2013 calendar year compared to a more moderate 7.9 per cent increase in 2014.”

Based on the December results, the annual rate of capital growth has continued its moderation which has been ongoing since April 2014.

After the annual rate of combined capital city home value growth peaked at 11.5 per cent over the 12 months to April 2014, the rate has now slowed to 7.9 per cent in December 2014. Combined capital city home values have increased at their slowest annual pace since October 2013.

At an individual capital city level, the annual rate of home value growth is now lower than its recent peak. According to Mr Kusher this would tend to suggest that peak value growth has now passed. “We would anticipate that the rate of growth will continue to slow through 2015 despite the low interest rate environment,” he said.

Although home value growth has been recorded at 7.9 per cent throughout the 2014 calendar year, the rate of growth has varied between a fall of -0.6 per cent in Canberra to an increase of 12.4 per cent in Sydney. While Canberra was the only city to record an annual fall in home values, Melbourne was the only city other than Sydney to have recorded annual value growth of more than 5.0 per cent (7.6%).

Looking at the different segments of the market based on dwelling values, the broad middle 50 per cent of capital city suburbs have recorded the greatest value rise over the past year. The most affordable 25 per cent of capital city suburbs have recorded a gain of 7.7 per cent compared to 8.5 per cent across the middle 50 per cent of suburbs and 7.8 per cent across the most expensive 25 per cent.

Auction clearance rates reduced noticeably across the two largest auction markets, Sydney and Melbourne, over the final two months of the year. While clearance rates were typically recorded at around the high 70 per cent and mid 70 per cent mark respectively, at the start of Spring, clearance rates in December were around the mid to high 60 per cent mark in both Sydney and Melbourne.

While dwelling values are generally still rising, rental growth is sitting at its lowest annual rate in more than a decade, with combined capital city rents increasing by just 1.8 per cent over the past 12 months. House rents have increased by 1.7 per cent over the past year compared with a 2.4 per cent for units. With value growth outpacing rental growth, yields continue to shift lower. Twelve months ago gross rental yields across the combined capitals were recorded at 3.9 per cent for houses and 4.6 per cent for units. As at December 2014, gross rental yields were recorded at 3.7 per cent for houses and 4.5 per cent for units.

According to Mr Kusher, CoreLogic RP Data expects dwelling values will continue to appreciate in 2015, at least across the combined capital cities. However, the rate of capital gain is likely to continue to slow over the coming months.

“Affordability hurdles in Sydney, and to a lesser extent in Melbourne, are making it increasingly difficult for some buyers to enter the market. Additionally, low rental yields and the likelihood of tougher lending criteria to investment buyers will likely dampen the very active investor segment of the market which may in turn reduce housing demand in 2015.”

“Furthermore, with so much investment activity increasing the stock of rental housing as well as the surge in dwelling approvals, we would expect that rental growth will remain sluggish across the capital cities. As a result we anticipate a further compression of gross rental yields in 2015,” Mr Kusher said.


Read full report with charts and graphs here

Media enquiries contact:
CoreLogic RP Data: Mitch Koper, National Media & Communications Manager 1300 734 318 or mitch.koper@corelogic.com.au

Introduction to the CoreLogic RP Data Daily Hedonic Home Value Index methodology:
The CoreLogic RP Data Hedonic Home Value Index is calculated using a hedonic regression methodology that addresses the issue of compositional bias associated with median price and other measures. In simple terms, the index is calculated using recent sales data combined with information about the attributes of individual properties such as the number of bedrooms and bathrooms, land area and geographical context of the dwelling. By separating each property comprising the index into its various formational and locational attributes, differing observed sales values for each property can be separated into those associated with varying attributes and those resulting from changes in the underlying residential property market. Also, by understanding the value associated with each attribute of a given property, this methodology can be used to estimate the value of dwellings with known characteristics for which there is no recent sales price by observing the characteristics and sales prices of other dwellings which have recently transacted. It then follows that changes in the market value of the stock of residential property comprising an index can be accurately tracked through time. CoreLogic RP Data owns and maintains Australia’s largest property related database in Australia which includes transaction data for every home sale within every state and territory. CoreLogic RP Data augments this data with recent sales advice from real estate industry professionals, listings information and attribute data collected from a variety of sources. For detailed methodological information please visit www.corelogic.com.au.