CoreLogic’s Accumulation Index looks at the total returns from the housing asset class factoring in the change in the value of the dwelling and the gross rental return from the property.
The figures show that nationally, the total returns from the housing asset class over the 12 months to August 2017 were 13.2%. Because the return is calculated from value change as well as the gross rental yield, you tend to find that houses have a superior value growth performance while units offer superior rental returns.
Over the 12 months to August 2017, total returns have been recorded at 14.0% for houses and 12.3% for units. The recent data for the combined capital cities shows that total returns have started to slow.
Regional markets are also beginning to see total returns slow however, the returns over recent years have generally not been as strong as those across the combined capital cities. Over the past 12 months, total returns have been recorded at 11.7% for houses and 10.2% for units.
Hobart has recorded the strongest annual growth of all capital cities over the past year and it also has some of the highest rental yields which has meant it has had the strongest total returns. Total returns for houses over the past year have been above 10% in each of Sydney, Melbourne, Adelaide, Hobart and Canberra. For units, double-digit total returns have been achieved over the past year in each of Sydney, Melbourne and Hobart. Units in Darwin were the only capital city property type to achieve negative returns over the past year.
With capital growth now appearing to have peaked and rental yields at record lows it is reasonable to expect a further moderating of total returns over the coming months. The other important thing to consider when looking at total returns is the calculation of the rental income. Although rents are increasing in many areas, the assumption in a gross rental yield calculation is that the property is occupied for 52 weeks of the year. In some parts of the country this is increasingly difficult to achieve and it can eat into the investment returns.
Upcoming auctions
This week, CoreLogic is currently tracking 2,044 auctions across the combined capital cities, the number of properties scheduled to go to auction this week is only slightly lower than final results last week, which saw 2,074 auctions held across the combined capitals, however as the week progresses volumes are likely to see some upward revision.
Across the two largest auction markets, Melbourne and Sydney are expected to see volumes remain relatively steady this week, with 998 Melbourne homes scheduled to go to auction this week, increasing by 2 per cent on last week’s 976 auctions, while Sydney is set to see -2 per cent fewer auctions this week compared to last, with 763 properties scheduled to go under the hammer from the 779 last week.
There are fewer auctions scheduled across the remaining capital cities this week compared to last, with the exception of Canberra where volumes are expected to increase slightly. Over the corresponding week last year, there were 2,064 auctions held across the combined capital cities.
The busiest suburb for auctions this week is Reservoir in Victoria. This will be the 6th consecutive week where the suburb has topped the list, with 22 properties scheduled to go to auction. Following closely is Glen Waverley also in Victoria with 20 auctions scheduled, while Maroubra (NSW) and Richmond (Vic) are both set to host 13 auctions each.
Summary of last week’s results
Last week, the final auction clearance rate fell to its lowest level so far this year, down -0.1 per cent from the previous low seen over the week ending 25 June 17 (66.5 per cent), recording a 66.4 per cent rate of clearance across a lower volume of auctions over the first week of spring (2,047). Over the week prior the clearance rate was a higher 68.3 per cent across 2,270 auctions, while results from one year ago saw 77.1 per cent of the 1,899 auctions cleared.
Melbourne’s final auction clearance rate fell last week, with 71.3 per cent of auctions clearing, there were 976 auctions held across the city, decreasing from the 1,124 auctions the previous week when a higher rate of clearance was recorded (72.3 per cent). In Sydney, final results saw the clearance rate for the city decrease last week, with 65.5 per cent of the 779 auctions successful, down from the 67.4 per cent across 832 auctions the week prior.
Performance across the smaller auction markets were mixed last week, with clearances rates improving in Brisbane, Perth and Tasmania, while Adelaide and Canberra saw final clearance rates fall week-on-week. Of the non-capital city regions, Geelong recorded the highest clearance rate with 87.1 per cent of auctions clearing last week, while the Gold Coast had the highest volume of auctions (44)
