According to CoreLogic Research Director Tim Lawless, capital gains remained positive across Australia’s combined capital city housing markets, however, the pace of growth has reduced when compared with previous months, with October dwelling values rising by 0.5%, compared with a 1.0% lift in September and 1.1% rise in August.  The latest monthly housing market data takes the quarterly change in capital city dwelling values to 2.7% and 7.5% higher over the past twelve months.

Apart from Adelaide (-1.3%), Hobart (-2.8%) and Perth (-1.5%), every capital city recorded a rise in dwelling values over the past three months, with the Canberra housing market recording the largest increase in values after a 5.6% quarterly rise.  Mr Lawless said, “The strong conditions across the Canberra market are largely related to rising house values, with unit values increasing at less than half the pace of detached housing.”

Index results as at October 31, 2016

Sydney continued as the stand out based on annual capital gains, recording the largest year-on-year increase; dwelling values are now 10.6% higher over the past 12 months.  Detached houses (+10.9%) are showing only a slightly higher rate of capital gain compared with units (+9.1%) across Sydney, highlighting the healthier supply/demand dynamic that exists across the Sydney region for higher density housing.  Mr Lawless said, “This also points to higher demand for Sydney units considering how expensive Sydney houses have become.  Units generally provide a more affordable option for home ownership and investment for many buyers.”

“In most other markets, detached housing is generally outperforming the unit sector as concerns around the high number of units available for sale in the market dent buyer confidence, coupled with lending policies for unit stock becoming tighter.” 

According to Mr Lawless, the divergence in performance between houses and units is most clearly evident in Melbourne and Brisbane.  The annual rate of capital gains in Melbourne remains strong at 9.1%, however there is a substantial difference in growth rates between houses and units, with house values up 9.6% compared with a 5.2% increase in unit values over the past year.  Brisbane’s housing market has shown a larger capital gain spread, with house values up 4.7% compared with a 1.4% fall in unit values over the year.

He said, “The weaker performance of unit values across the Brisbane market may be partially attributed to supply concerns, as unit supply levels across key regions of Brisbane’s inner city show the potential for a significantly larger relative increase in existing stock levels when compared with Melbourne and Sydney.” 

The CoreLogic Settlement Risk report is currently tracking approximately 49,000 units that have been approved for construction across the broad Brisbane metro region.  Mr Lawless said, “While it’s unlikely that all projects will proceed through to commencement, based on the approval numbers across Brisbane, we could see an uplift in existing unit stock which is in excess of 25% over the next two years.   Comparatively, in Sydney and Melbourne, the approved unit pipeline is higher at approximately 96,000 over the next 24 months, however the potential stock uplift is much less significant, at 13% and 16% respectively relative to existing unit stock levels.”