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Value recovery driven by expensive houses

As home values sharply recover in Sydney and Melbourne, there has been a particular spike in the recovery of the premium housing, according to new research.

According to the November Home Value Index, released by property analytics company CoreLogic, the value of properties sold across Australia in the month ending 30 November 2019, grew by 1.7 per cent – the largest national monthly gain since 2003.

While the report shows this uptick has been particularly driven by the Sydney and Melbourne markets, the report also reveals that the recovery has been particularly noticeable in the upper quartile of the market.

Building on a trend highlighted in October, it is the more expensive properties that are driving the value rebound. 

Looking at the figures over the past three months, values across Sydney’s top quartile were up 7.4 per cent over the three months ending November, compared with a 3.8 per cent rise across the lower quartile. 

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Meanwhile, in Melbourne, top quartile values were up 8.1 per cent over the same three-month period compared with a 4.2 per cent rise across the lower quartile.

Brisbane, Perth and Darwin were also recording a similar trend where premium value properties were outperforming lower value properties in the three-month period.

While housing values are rising across each of the valuation cohorts, the recovery trend is most concentrated within the premium sector of the market, CoreLogic’s head of research, Tim Lawless, said.

“This trend is most evident in Sydney and Melbourne where the top quartile of the market is outperforming the broad ‘middle’ of the market and lower quartile, he said.

“The stronger performance across the higher value end of the market can likely be attributed to a combination of values falling more in this sector during the downturn, as well as recent adjustments to serviceability rules which has boosted borrowing capacity. 

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“Additionally, the scarcity value of detached homes in many of the blue-chip property markets is another factor supporting strong capital gains.”

Mr Lawless concluded: “As housing values become less affordable in these high-end markets, demand is likely to ripple outwards to the more affordable areas.”

As previously reported, CoreLogic’s Home Value Index for the month ending 30 November showed a steep recovery in home values over the month. 

Sydney dwellings saw monthly growth of 2.7 per cent – the largest month-on-month gain it has seen since 1988, while Melbourne properties saw their strongest growth since 2009 (2.2 per cent), taking it back to similar growth levels as the peak in 2012-17.

Mr Lawless told Mortgage Business: “This really highlights how fast this rebound has been in those two markets, and I think we will probably see growth continuing into early 2020 while supply levels remain very low, which is creating quite a bit of urgency in the market.”

[Related: Sydney sees largest price growth since 1988]

Value recovery driven by expensive houses
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Annie Kane

Annie Kane is the editor of The Adviser and Mortgage Business.

As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts. 

Contact Annie at: This email address is being protected from spambots. You need JavaScript enabled to view it.

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