Old rivalries die hard and here’s a race that Melbourne is winning over Sydney. But before struggling househunters get too excited about prices plummeting in the harbor city, let’s take a look at the facts.
Property prices in the two capitals are still rising, but Sydney has just taken a back seat to Melbourne’s price growth — even if it’s ever so slightly.
According to the January 2016 CoreLogic RP Data Hedonic Home Value Index, released today, the Melbourne market has taken first place for annual growth.
While Melbourne’s dwelling values (that’s houses and units combined) were up 11% over the year, Sydney’s movement was a slightly less impressive 10.5% rise.
But the harbor city still takes the cake for actual ticket prices. Sydney’s median dwelling price is now sitting at A$776,000, while Melbourne’s figure is a more humble A$595,000.
“While still a high rate of annual growth, Sydney’s annual rate of capital gain is now at a 29-month low and has been progressively softening since peaking at 18.4% in July last year,” said Tim Lawless, CoreLogic’s head of research.
“Melbourne’s housing market has been more resilient to slowing growth conditions, which has propelled the annual growth rate to the highest of any capital city, with dwelling values 11% higher over the past 12 months.
“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.”
Sydney’s annual dwelling values are up 10.5%, but it’s still a pricier city than Melbourne. Supplied
Mr Lawless said the latest figures showed Sydney’s housing market was now “playing second fiddle” to Melbourne’s — at least in annual growth terms.
“In fact, over the past six months, the performance gap between Sydney and Melbourne is stark. Sydney dwelling values have reduced by 0.6% between July last year and the end of January 2016, compared with a 3% rise across Melbourne dwelling values,” he said.
RELIEF FOR RENTERS
The report also showed that there might be a bit of relief on the horizon for renters because although growth in dwelling values across the capitals has cooled from the heady heights of mid last year, annual rental growth has actually remained largely unchanged.
Mr Lawless said these are currently the weakest rental market conditions he had ever seen since the property data firm started collecting figures in 1996.
“In fact there hasn’t previously been a 12-month period when rents didn’t rise across our combined capitals index.” he said.
Darwin and Perth were responsible for dragging the broader capital cities’ rental results down. Weekly rents were down 13.4% over the past year in Darwin and 8.6% lower in Perth. Dwelling rents were also down in Brisbane (-0.7%) and Adelaide (-0.4%).
The largest rental increases were in Sydney and Melbourne where weekly rents rose 1.4 % and 2.1% respectively.
“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,” he said.
WHAT IT MEANS FOR HOME BUYERS
So what does the data mean for anyone delving into property in 2016? Right now it is a little too early to tell.
“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,” Mr Lawless said.
“January tends to be a relatively quiet month across the housing market, however across the capital cities we estimate that there were approximately 16,500 dwelling sales contracted in January.
“The bounce in dwelling values in January may provide an early sign that housing values across the combined capital cities are not likely to experience material decreases in 2016. We believe that the rate of capital gain across the combined capitals in 2016 is likely to be less than the 7.8% experienced in 2015, driven by a slowdown in Sydney and Melbourne and continued softness in the Perth and Darwin markets.”
- Source: Mansion Global