![Affordability going to the dogs? Rents and house prices both rose in the December quarter.](/content/dam/images/g/j/z/w/k/2/image.related.afrArticleLead.620x350.gts24n.png/1485172734116.jpg)
Sydney's median house price jumped to a record $1.1 million in the December quarter, boosting the affordability challenge for the new NSW Premier, Gladys Berejiklian, who singled out the issue on Monday.
The fastest quarterly increase in a year and a half pushed the national median house price up 3.4 per cent over the three-month period to $780,887, and unit prices up 2.4 per cent to a record $551,110, the latest Domain Group figures show.
Rents also rose, confounding expectations they would be kept in check by flatlining wages.
Sydney's median house price jumped 4.7 per cent to $1,123,991 from $1,068,303 in the September quarter. The contrast between soaring prices in the NSW capital, where a derelict 2-bedroom terrace house in Paddington sold at the end of October for $1.19 million, and the rest of the country is clear. A three-bedroom sandstone family home in Adelaide's upmarket Dulwich sold for slightly less – $1.15 million – a few weeks later in November.
![What $1.1m will get you](/content/dam/images/g/t/x/7/v/y/image.imgtype.afrArticleInline.620x0.png/1485497373836.png)
The figures published by Domain – which is owned by Fairfax Media, publisher of The Australian Financial Review -–are strong. Rival data provider CoreLogic earlier this month put the median price of houses in Australia's five mainland state capitals at $645,000 and units at $530,500. CoreLogic put Sydney's median house price at $991,000 and Melbourne's at $720,000.
But the strong market that also pushed Melbourne's median house price to a new record $795,447 shows signs of easing, Domain said. The national 7.7 per cent growth in median prices over the calendar year was the weakest pace since 2012. For units, it was a similar story – the across-the-board 4.3 per cent increase in apartment prices last calendar year was also the weakest rate of gain in four years.
Overarching stimulus
"Lower interest rates were the overarching stimulus for prices growth in 2016, with official cuts in May and August clearly revitalising housing markets," Domain chief economist Andrew Wilson said.
"In 2017, more neutral outcomes are likely for interest rates, suggesting that house price growth in capital city housing markets will steady."
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But for now, figures show the market is strong. Canberra house prices jumped 5.6 per cent over the quarter to a new record median price of $684,395. Adelaide house prices rose 1 per cent to also chalk up a new record of $501,166. Hobart's 6.2 per cent quarterly gain – the strongest of any city – took its median house price to $382,888.
The numbers underscore the challenge for new Premier Berejiklian, who in her first press conference on Monday said housing affordability was a "huge priority" for her government.
"I want to make sure that every average hard-working person in this state can aspire to own their own home," Ms Berejiklian said.
House prices in Perth and Darwin fell 0.5 per cent over the quarter.
Unit prices fell on a quarterly basis in Brisbane, Perth and Canberra. The 7.6 per cent year-on-year decline in the Queensland capital was the biggest fall since 2000 and pushed Brisbane unit prices to near eight-year lows.
Separate Domain figures showed rising rents are giving little relief to tenants seeking accommodation across Australia's eastern seaboard.
Rents marched higher in the December quarter, boosting gains for investors and forcing cash-strapped tenants to eke out ever-higher weekly payments.
House rents in Sydney rose 1.9 per cent from September to a median asking weekly rent of $540. House rents jumped 2.5 per cent in Melbourne to $410. In Canberra they jumped 5.3 per cent to $500 and in Hobart they surged 7.6 per cent to $355.
Yields rose for owners of houses in all cities except Perth, Hobart and Darwin over the quarter, and yields rose for apartment owners in every city except Brisbane, Perth, Hobart and Darwin.
Sydney's gross rental yield on houses rose 1.1 per cent to 3.4 per cent in December and 1 per cent to 4.04 per cent on units.
Deteriorating affordability
In Melbourne, rental yields on houses rose 1.8 per cent to 3.64 per cent and 2.8 per cent to 4.58 per cent on units.
The surging growth of rents showed a deteriorating affordability picture, Dr Wilson said.
"Despite the lowest incomes growth on record, rents in some capitals continue to rise at a faster rate than wages, which can only diminish rental affordability and increase rental stress," he said. "Record levels of new dwelling construction and surging investor activity in Sydney and Melbourne have as yet failed to ease imbalances in these markets. Increased supply is being offset by strong demand generated from high levels of migration and relatively low numbers of first-home buyers."
Rental price growth for units was more subdued, suggesting the growing supply was starting to slow the rate of gain. Unit rents were unchanged quarter on quarter in Melbourne, Brisbane and Adelaide.
In Sydney, they dipped 1 per cent from September to $520, but this was only the fourth quarterly decline in Sydney rents in 11 years, Dr Wilson said.
"Higher apartment numbers are absolutely improving the rental market in Sydney for unit tenants. But it's going from absolutely terrible to terrible," he said. "The trend is improving if you're a unit tenant in Sydney. However, it is still being offset by a high level of migration and a very low number of first-home buyers [who] are going to push strong levels of [rental] demand."
While rising rents make life harder for renters, they are a boon for investors, whose ranks keep swelling. Mortgage lending to investors jumped 4.9 per cent in November, defying rising interest rates charged by commercial banks, official figures last week showed.