Melbourne overtakes sydney to become hottest australian housing market
Melbourne has overtaken Sydney to become Australia's hottest housing market. The harbour city has dominated price growth in recent years, as values race ahead of the rest of the country. Now, though, Melbourne has stolen the spotlight.
Sydney dwelling values reduced 0.6 per cent between July last year and the end of January 2016, according to new figures from CoreLogic RP Data. Over the same period, Melbourne enjoyed a 3 per cent rise in prices.
The striking shift in momentum is partly due to Sydney's overheated market beginning to cool.
Indeed, the last six months saw both Brisbane and Canberra dwelling values rise a comparitively fairer 2 per cent, with Hobart house prices also climbing 1.3 per cent. (Adelaide's remained flat on 0.1 per cent.)
On an annual basis, Sydney values jumped 10.45 per cent, behind Melbourne's 11 per cent, but also far below its peak of 18.4 per cent (recorded in July 2015). After months of progressively softening, Sydney's rate of annual growth is now at its lowest in over two years.
On a quarterly basis, meanwhile, Sydney saw values fall 2.1 per cent, the largest of the cities. While Darwin and Adelaide saw prices dip 1.4 percent and 0.9 per cent respectively, Hobart saw prices climb 3 per cent. Melbourne saw values remain steady with a slight slip of 0.1 per cent.
Hobart also led the monthly figures in January 2015, with a 4.7 per cent jump in values, followed by Melbourne with a 2.5 per cent hike in values and Canberra with a 2.8 per cent lift. Sydney prices showed a rise of 0.5 per cent, while the remaining four capital cities showed dwelling values to be either flat or down.
Melbourne has been the most resilient to slowing growth conditions, says head of research Tim Lawless, which has helped the tables to turn between the two heated rivals.
"Previously, during the height of the growth phase, there was a large separation between Sydney’s housing market, which was streaking ahead, and Melbourne’s, where the rate of capital gain was substantial but still well below the heights being recorded in Sydney. The latest data reveals Sydney’s housing market is now playing second fiddle to Melbourne’s, at least in annual growth terms."
The news arrives as the Australian government increasingly cracks down on illegal foreign investment in the country's real estate, something that has primarily focused on Sydney's market. While investment activity is now slowing, Lawless notes that this is also a side effect of the price rises, which are impacting yields for investors.
"With dwelling values rising substantially more than rents in Sydney and Melbourne, this ongoing effect has created a compression in gross rental yields to the extent that gross yields in these cities are now only marginally higher than record lows," explains Lawless.
According to the most recent Reserve Bank’s private sector housing credit data, the pace of investment-related credit growth has fallen well below the 10 per cent speed limit implemented by APRA in December 2014.
"As housing market activity moves out of its seasonally slow festive period, we are likely to have a much better gauge on how the overall housing market is performing in the New Year," he comments.
Nonetheless, property prices in the two capital cities are still on the up, with Sydney remaining number one in terms of Pure price: the city's median house price is $776,000, above of Melbourne's $595,000. As price hikes Down Under are increasingly driven by more affordable Melbourne, investors seeking capital growth are likely to follow suit.