Upgraders are expected to be the biggest drivers of the Sydney and Melbourne markets — and eventually what will lead to growth in those cities coming to standstill. Picture: Kelly Rohan
DESPITE hitting record levels, home value growth has continued to slow, latest data shows, giving the Reserve Bank of Australia one less reason to hold back on a rate cut tomorrow.
The CoreLogic Home Value Index, out this morning, showed a rise of 0.8 per cent over July, after 0.5 per cent in June, 1.76 per cent in May and 1.7 per cent in April.
The annual rate of growth across the capitals (6.1 per cent) was its slowest since September 2013, but it was the 50th month that the combined capitals have been in growth mode. Since June 2012, combined capital city dwelling values have risen 38.3 per cent.
CoreLogic senior research analyst Cameron Kusher said there had definitely been a slowing of growth in the last couple of months, though activity was still strong in places such as Sydney and Melbourne.
He expected the next move by the RBA on interest rates to be down tomorrow.
“I think interest rates will probably be cut tomorrow largely because inflation is very low,” he said. “But RBA will keep a close eye on the housing impact of any rate cut.”
Cameron Kusher from CoreLogic is tipping a rate cut tomorrow.Source:Supplied
He said given a big pullback by investors and the fact that first home buyers were sluggish, it was upgraders that would drive the market — something he believed would eventually see Sydney and Melbourne growth hit the brakes.
“That’s the thing that will eventually slow Sydney and Melbourne. It’s not financially viable to upgrade every three or four years. They will probably reach a point where not many upgraders will be active in the market and will slow. It will happen within this decade but as to when that’s anyone’s guess.”
CoreLogic head of research Tim Lawless said the recent moderation in the rate of capital gains should be seen a positive sign that dwelling values “may be returning to more sustainable levels”.
“However, the growth trend rate is still tracking considerably faster than income growth resulting in a deterioration of housing affordability,” he said. “Using Sydney as a case in point, the Australian National University estimates that Sydney household incomes have grown by approximately 4.5 per cent per annum since June 2012 while dwelling values are up 12.1 per cent per annum.”
Tim Lawless says dwelling values “may be returning to more sustainable levels”.Source:News Corp Australia
In the current growth cycle, which began in Sydney and Melbourne saw cumulative 61.3 per cent and 42.0 per cent growth over the cycle to date.
Hobart has seen values rise 17.6 per cent over the growth cycle followed by Brisbane (17.4 per cent), Adelaide (14.3 per cent) and Canberra (12.4 per cent).
Adelaide was a surprise performer over the month (1.4 per cent), just pipping Sydney (1.3 per cent) and Melbourne (1.1 per cent), but that’s where any similarities ended.
Sydney and Melbourne continued to blitz the rest of the market, with year on year growth of 9.1 per cent and 7.5 per cent respectively.
Four of Australia’s eight capital cities saw dwelling values fall over July, including Brisbane (-0.8 per cent) Perth (-0.9 per cent), Darwin (6.2 per cent) and Canberra (-0.7 per cent).
Of those four, only Canberra was able to pull out of negative territory in the quarterly data (0.7 per cent), while Brisbane (-0.9 per cent), Perth (-4.3 per cent) and Darwin (-7 per cent) went backwards.
The RBA board monetary policy decision is expected to be handed down at 2.30pm tomorrow AEST.
Highlights over the three months to July 2016
Best performing capital city: Sydney +5.6%
Weakest performing capital city: Darwin -7.0%
Highest rental yields: Darwin houses with gross rental yield of 5.3% and Hobart Units at 5.3%
Lowest rental yields: Melbourne houses with gross rental yield of 2.8% and Sydney units at 3.9%
Most expensive city: Sydney with a median dwelling price of $775,000
Most affordable city: Hobart with a median dwelling price of $327,800
Source: CoreLogic
Originally published as RBA rate cut tipped as growth slows