We look back at how Australia’s housing market fared in July, and what might be ahead in the months to come.

Property values continue to climb, rising 2.8% across the capital cities in July 2015 to be 11.1% higher over the past year, according to the CoreLogic Home Value Index.

New Land Estates

Australian property is now worth $6 trillion, according to CoreLogic.

Again, the gains were almost all in Sydney and Melbourne. Melbourne values rose 4.9% over the month, followed by Sydney at 3.3%. Next best was Hobart, at 1.1%.

Over the quarter, Melbourne was on top, with a 6.1% rise, followed by Sydney’s 5.4%. Canberra was third, at 2.3%.

Looking back over 12 months, Sydney values were up 18.4% and Melbourne values up 11.5%. Third on the list, Brisbane, could only report a 3.9% rise.

“There is starting to be a very significant disparity between dwelling price growth in Sydney and Melbourne and the rest of Australia,” says our economist, Diana Mousina.

“To some extent, this disparity may continue given indicators of continued solid demand for Sydney and Melbourne dwellings. But, significant rises in dwelling prices along with some slowing in rental growth and a pick up in vacancy rates means that rental yields look lower.  These factors may act as a drag on demand for housing in the two largest capital cities.”

Property values, July 2015 and year-on-year (YOY)

·              Sydney +3.3% (+18.4% YOY)

·              Melbourne +4.9% (+11.5% YOY)

·              Brisbane +0.5% (+3.9% YOY)

·              Adelaide -1.1% (+3.4% YOY)

·              Perth +0.1% (-0.3% YOY)

·              Hobart +1.1% (+2.5% YOY)

·              Darwin +0.4% (-5.3% YOY)

·              Canberra +0.3% (+1.2% YOY)

·              Combined capitals +2.8% (+11.1% YOY)
SOURCE: CoreLogic

Rental yields

Capital city rents rose just 0.9% over the 12 months to the end of July, which is the slowest pace on record, CoreLogic says.

The highest gross rental yields could be found in Darwin houses (5.7%), and Darwin and Brisbane units (5.5%).

In Sydney and Melbourne, where there has been the highest capital growth, houses were returning record low gross rental yields (3.2% in Sydney and 3.0% in Melbourne). Units were very close to record lows too (4.2% in Sydney and 4.1% in Melbourne).1 

“Low rental yields are expected to put downward pressure on investor demand,” Mousina says.

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Building approvals                                                   

The number of residential building approvals fell 8.2% in June, according to the latest figures from the Australian Bureau of Statistics, but was up 8.6% compared with the same time last year.

Our senior economist, John Peters, says: “Despite the monthly fall in approvals, overall the latest data confirms ongoing solid housing sector activity.”

Our economists expect a record level of construction in 2015, with about 220,000 new dwelling commencements.

“Ongoing growth of housing supply will at least partially address some of the ongoing housing affordability issues causing a great deal of angst among potential buyers, especially in the Sydney and Melbourne housing markets,” Peters says.2  

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This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. You should consider seeking independent financial advice before making any decision based on this information.