Mortgage business logo

City dwelling values increase while rental yields decrease

Capital city dwelling values rose by 2.9 per cent over the last three months, while rental yields have held at a “historic low”, a new report has revealed.

CoreLogic’s Hedonic Home Value Index found that gains were made across most capital city housing markets for the three months to 30 September, continuing a “strong headline rate of growth” with a 1 per cent month-on-month gain.

According to the research group, the current growth phase has now entered its 52nd month, taking capital city dwelling values 41.3 per cent higher since the growth cycle commenced in June 2012.

The report suggested that the highest performers where dwelling values increased were Melbourne, up 5 per cent over the last quarter due to a strong rise of 5.2 per cent in house values; followed by Canberra, with a growth of 4.5 per cent; and Sydney, with a growth of 3.5 per cent.

The weakest performers over the quarter, however, were Darwin, where dwelling values decreased by 4.5 per cent; Perth, decreasing by 3.2 per cent; and Brisbane, slipping by a marginal 0.3 of a percentage point.

The findings also suggested that although dwelling value growth in Sydney and Melbourne was not as strong as it had been, it continued to be supported by high auction clearance rates, which were “at their strongest levels since June 2015”.

Clearance rates remained above 80 per cent in Sydney, while Melbourne have been consistent - sitting above 75 per cent - with the top three markets in Inner Melbourne, Melbourne’s Inner South and North Sydney/Hornsby.

md discover

According to CoreLogic, in the combined regional markets of Australia, where the measure of value growth lags by one month, house values slipped by 1.1 per cent over the three months to the end of August. While modest declines were recorded across most of the ‘rest of state’ housing markets, the weakest conditions continue to be experienced in regional Western Australia, where house values have fallen 12.4 per cent over the past twelve months.

“The housing market has clearly been a substantial source of wealth creation for many Australians, particularly for home owners in Sydney and Melbourne,” said Tim Lawless, CoreLogic head of research for Asia-Pacific.

Rental yields at historic low

In contrast, however, Mr Lawless’ report noted that rental yields have decreased due to residential property values “rising at a faster rate than weekly rents”.

“The average gross rental yield across the combined capital city dwelling market has held firm at 3.3 per cent over the month, which is at an historic low,” he said.

The report suggested that “by a large margin”, the lowest yields were in Sydney and Melbourne where “value growth has been the most extreme and caused yields to compress”.

“[M]any factors are at play across Australia’s housing market. In fact, there isn’t just ‘one’ single housing market nationally, there are a multitude where conditions vary substantially by way of geography, housing type, and price point,” Mr Lawless concluded.

[Related: Dwelling constructions rebound in wake of slowdown]

Share this article

Join Australia's most informed brokers

Do you know which lenders are providing brokers and their customers with the best service?

Use this monthly data to make informed decisions about which lenders to use. Simply contribute to the survey and we'll send you the results directly to your inbox - completely free!

brokerpulse graph

What are the main barriers to securing a mortgage at the moment?