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House prices are booming again in Melbourne and Sydney

House prices across the nation have seen their biggest jump since March of 2017 in what is a return to boom times for many capital cities.

Once again Sydney and Melbourne led the way, both jumping 1.7 per cent for the month of September, while Canberra was the other strong performer leaping 1 per cent, according to the latest data from Corelogic.

Again, house prices in the mining states continue to go backwards, with Perth prices falling -0.8 per cent while Darwin was down -0.2 per cent for the month.

The combined capital cities were up 1.1 per cent for the month and 2.2 per cent for the quarter, meaning the recovery is well and truly under way.

CoreLogic head of research Tim Lawless believes it won’t be long before house prices return to their boom-time highs. 

“Although housing values are now consistently tracking higher, at least at a macro-level, the national index remains 6.8 per cent below the October 2017 peak, indicating that buyers still have some time to take advantage of improved housing affordability before values return to record highs,” Mr Lawless said.

Highlights over the three months to September 2019

▶ Best performing capital city: Sydney +3.5 per cent

▶ Weakest performing capital city: Perth -1.9 per cent

▶ Highest rental yield: Darwin 6 per cent

▶ Lowest rental yields: Sydney 3.2 per cent

The September gains were once again driven by stronger conditions emanating from Sydney and Melbourne where dwelling values increased by 1.7 per cent over the month.

Australia’s two largest cities have seen a rapid bounce-back in home values over the past two months, with Sydney up a cumulative 3.3 per cent and Melbourne up 3.2 per cent in August and September. 

Housing values remain 11.9 per cent below their July 2017 peak in Sydney and 7.9 per cent below Melbourne’s November 2017 peak.

Brisbane (+0.1 per cent) and Canberra (+1.0 per cent) were the only other capital cities to record a rise in dwelling values over the month, while values held firm in Adelaide but fell in Hobart (-0.4 per cent) and continued their long run of losses in Perth (-0.8 per cent) and Darwin (-0.2 per cent).

Most of the regional markets recorded a rise in September, with regional SA (-0.5 per cent) and regional WA (-1.3 per cent) the only ‘rest of state’ areas to record a drop in values.

Source: CoreLogic

Mr Lawless said the strong rebound in Sydney and Melbourne housing markets relative to other regions, can be attributed to a variety of factors. 

“While all regions are benefiting from low mortgage rates and improved access to credit, economic and demographic conditions in New South Wales and Victoria continue to outperform most areas of the country.

“Population growth is higher, unemployment is lower and jobs growth is stronger, providing a solid platform for housing demand.

“Low mortgage rates, and the expectation that they will move lower, along with better affordability, a loosening in credit rules and improved housing sentiment, are all factors contributing to the rebound.”

Another factor cited by Mr Lawless as driving the strength in Sydney and Melbourne property markets could be higher levels of investor participation.

The latest housing finance data from the ABS (to end of July) shows investors comprised 32 per cent of mortgage demand across New South Wales and 26 per cent of Victorian mortgage demand, which is higher relative to any of the states or territories.

Not all markets are as strong as Sydney and Mebourne, but there is enough to suggest things are turning around.

“Although markets outside of Sydney and Melbourne aren’t showing the same recovery trend, most areas have either seen a reduction in the rate of decline or are seeing a modest trajectory of growth as low mortgage rates and a slight loosening in credit policy support buyer demand,” Mr Lawless said.

Regional areas
The September housing market results provide further confirmation the housing market recovery is in full swing across Sydney and Melbourne while the remaining capital city and regional areas are showing a mixed result. 

The regional sub-markets have generally shown better resilience to falling prices relative to the capitals.

Across the 42 sub-regions outside of the capital cities, 17 regions recorded a rise, or stable conditions over the 12 months ending September 2019. 

The Riverina region of NSW led the annual capital gains with a 4.5 per cent gain, however values have started to slip lower across this market, down 1.9 per cent over the past three months.

The Mackay/Isaac/Whitsunday region was the second best performing regional area, with values up 4.4 per cent over the past 12 months, although home values remain almost 25 per cent below their 2012 peak.

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