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After an increase in values of 3.8% over the first four months of the year, prices in key Australian cities fell 0.9% in May, according to the latest residential index. The CoreLogic RP Data Home Value Index recorded its first month on month fall since November last year and it comes at a time when values have been trending higher. According to CoreLogic RP Data head of research, Tim Lawless, the growth has been driven by exceptionally strong housing market conditions in Sydney, and to a lesser extent in Melbourne and he expects May’s dip to be short lived. ‘Other market indicators are also pointing to stronger conditions for the Sydney and Melbourne housing markets with auction clearance rates remaining at or close-to record highs throughout May along with low advertised stock levels across the largest cities, particularly for Sydney,’ he said. ‘The negative May result is likely due to a natural correction from the previously strong month on month results. Added to this is the market stimulus due to lower interest rates, and a well-received federal budget in May, all of which are likely to keep momentum going in the market,’ Lawless explained. The May indices results also marks the three year anniversary for the current growth cycle which commenced at the end of May 2012. Since that time, Lawless noted that capital city dwelling values have increased by 24.2% with Sydney values rising a significant 39.3% since values bottomed out in May 2012. Melbourne dwelling values have seen the second highest rate of growth over the current cycle, increasing by 22.4% while in Darwin, values are 18.3% higher. Perth values are up 13.2% followed by Brisbane at 10.6%, Adelaide at 9.9%, Canberra at 8.3% and Hobart at 7.7%. ‘While every capital city has seen some level of capital gain over the growth cycle to date, the past 12 months’ performance has been more diverse. Dwelling values are down by 2% in Darwin and 1% lower in Hobart, while Perth is narrowly avoiding an annual correction with dwelling values up by just 0.7% over the past year,’ Lawless said. At the same time, he added that lower interest rates and high levels of investor interest have fuelled a rebound in the annual rate of dwelling value growth across Sydney and Melbourne where dwelling values are 15% and 9% higher respectively over the past 12 months,’ he pointed out. Both Sydney and Melbourne are also seeing their strongest economic conditions, coupled with the highest levels of new housing supply, particularly in the new apartment sector and according to Lawless the higher supply levels are likely to be a primary reason why unit values are rising at a much slower pace than house values in Sydney and Melbourne. ‘The pace of growth in unit values across Sydney is about half that being recorded across the detached housing sector, with house values up 16.4% over the year compared with an 8.8% rise in unit values,’ said Lawless. In… Continue reading →