Capital city dwelling values moved 1.4% higher over the month, taking the combined capital city index to an annual growth rate of 12.9%; the highest annual rate of growth since the twelve months ending May 2010.
Four of Australia’s eight capital cities are now showing an annual growth rate in dwelling values higher than 10%, while Perth and Darwin values continue to trend lower on an annual basis.
The March results highlight the continued resurgence in the pace of capital gains.
This became evident through the second half of 2016, fueled largely by lower mortgage rates and a rebound in investment activity.
The diversity of performance between houses and units is also a current key feature of the housing market.
Across the combined capitals index, house values were 13.4% higher over the past twelve months compared with a 9.8% rise in unit values.
The disparity in growth rates is more significant in those cities where high new unit supply is more apparent.
The weaker growth conditions within the unit markets’ sector reflect heightened levels of new supply across specific inner city precincts and also suggests that consumer confidence has been negatively affected by the warnings of a potential unit oversupply.
Given the recent policy announcements from the Australian Prudential Regulation Authority (APRA) are aimed at dampening investment related credit demand, we can expect lending conditions for investment purposes will tighten, particularly for investors with small deposits or those applying for an interest only loan.
Additionally, higher mortgage rates handed down by Australia’s major banks may contribute towards cooling some of the exuberance being seen in the largest capital city housing markets.
Furthermore, organic constraints in the market are becoming more pronounced.
As examples, record-low rental yields, which imply dwelling values are out of balance with rents, and heighted affordability constraints are preventing some prospective buyers from participating in the market.
Record-high levels of apartment supply are also likely to act as a brake on capital gains in those precincts where supply levels are high.
The ongoing strength in the housing market is apparent across a variety of other indicators such as settled sales CoreLogic estimates on settled sales volumes were 1.3% higher across the combined capitals region over the March quarter of 2017 compared with the first quarter of 2016, indicating an improvement in buyer demand compared with a year ago.
Stronger buyer demand can be attributed to the rising number of investors participating in the market compared with a year ago as well as the lower cash rate stimulus and population growth.
However, overall transaction numbers remain approximately 15.5% lower than their recent 2013/14 peaks.
Every capital city is now seeing fewer residential properties advertised for sale compared with a year ago.
The largest declines have been in Hobart and Canberra where stock is being rapidly absorbed despite a rise in newly advertised properties.
A shortage of advertised stock can contribute to upwards pressure on prices, as prospective buyers experience FOMO (fear of missing out) which reduces a buyers ability or willingness to negotiate on prices and causes some urgency in the decision making process.
Selling times, discounting rates and auction clearance rates remain strong across the ‘hot’ markets.
Based on housing finance commitments data for January from the Australian Bureau of Statistics (ABS), investors currently comprise slightly more than 50% of mortgage demand (excluding refinanced loans).
Considering the unprecedented level of high-rise unit construction currently underway, a large portion of which is reliant on investors absorbing the supply, a material decline in investment activity could result in a growing level of settlement risk for newly developed unit projects.
from Property UpdateProperty Update http://propertyupdate.com.au/national-housing-market-update-video-3/