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House prices across Australia’s capital cities have slowed in July after four of the country’s eight capitals recorded a drop in home values.
According to CoreLogic’s July Home Value Index, aggregate capital city house prices increased by 0.8% in the first month of the new financial year. Over the year to July, growth in capital city houses prices slowed substantially, recording price growth of just 6.1%. This followed year-on-year growth of 8.3% in June and is the slowest annual rate of appreciation since September 2013.
The annual rate of growth hit a peak of 11.1% across the combined capitals index in October last year.
Slowing house price growth can be attributed to the fact that four of the eight capital cities recorded a drop in house prices in July. Darwin home value declined by 6.2% over the month, followed by Perth (0.9%), Brisbane (0.8%) and Canberra (0.7%).
Sydney and Melbourne have also seen the annual rate of growth slip back to below 10%, with the July indices showing a respective 9.1% and 7.5% capital gain over the past twelve months.
Sydney reached a peak rate of annual growth in July last year when dwelling values rose 18.4% per annum. Melbourne hit its peak in September last year when values were increasing by 14.2% per annum.
Darwin and Perth remain as the only two capital cities to record a negative movement in dwelling values over the past twelve months ending July 2016, with values in Darwin down 7.6% and Perth values falling by 5.6%.
However, July marks the 50th month of the combined capitals growth cycle, which commenced in June 2012. Over the cycle to date, capital city dwelling values have risen by 38.3%.
CoreLogic head of research Tim Lawless said: “This demonstrates the strength in the Sydney and Melbourne growth trend with dwelling values across the two largest capitals recording a cumulative 61.3% and 42% over the cycle to date.”
Hobart, where the growth trend has recently accelerated, has been the next best performer with values rising 17.6% over the growth cycle, followed by Brisbane (17.4%), Adelaide (14.3%) and Canberra (12.4%).
But the recent moderation in the rate of capital growth should be viewed as a positive sign, according to Lawless. However, Lawless warns that despite the moderation, the growth trend rate is still tracking considerably faster than income growth resulting in a deterioration of housing affordability.
“Using Sydney as a case in point, the Australian National University estimates that Sydney household incomes have grown by approximately 4.5% per annum since June 2012 while dwelling values are up 12.1% per annum,” he said.
“The erosion in housing affordability is likely to be one factor working to slow housing demand across price sensitive market segments. We’re also seeing first home buyers are at lower levels across most states, and in particular, at record low levels of participation across Sydney.
“The latest ABS housing finance data shows that first home buyers in New South Wales now comprise of a record low 10.4% of all new owner occupier housing finance commitments.”
