Home prices in Melbourne are now rising at a faster rate than in Sydney. That’s the biggest takeaway from the latest CoreLogic RP Data’s Home Value Index.
In the three months to July 31, Melbourne’s housing market grew by an impressive 6.1%. Not that Sydney was a laggard by any means. In the same quarter, prices in Sydney grew by 5.4%.
But the tide may be slowing turning in Melbourne’s favour. Month-on-month, prices in Melbourne rose by 4.9%, compared to Sydney’s 3.3%.
However, year-on-year, Sydney still led the way in first place. Home prices in Sydney swelled by 18.4% YOY, compared to 11.5% in Melbourne.
Not surprisingly, this growth was largely investor-driven. In Sydney, investors still account for 60% of all home buyers. The national average sits closer to 50%. What it does point to is the idea that Sydney is testing the limits of the market. Melbourne is proving more attractive in contrast, where prices remain markedly lower.
Nonetheless, investors continue to pump up the real estate market in both Sydney and Melbourne. But the effects of this could recede in coming months.
Banks, at the behest of regulators APRA, have made recent changes to investor lending practices. Interest rates for investors are rising. At the same time, they’re imposing stricter lending standards too. The hope is that these measures will limit investor growth in the future. It’s still too early to tell what effect they’ll have.
However, it does suggest that demand could fall over the next few months. With investors making up half of property buyers, these measures should reflect in falling demand. This could explain why Melbourne is now outpacing Sydney.
The two-speed housing market
The feel-good factor in Sydney and Melbourne isn’t shared across Australia. In fact, the two-speed property market shows no signs of changing anytime. Sydney and Melbourne still have near-record clearances rates. Other cities aren’t so lucky. Demand, and prices, are either lacklustre of falling.
In the quarter to July, home values in Adelaide fell by 0.9%. Similarly, Perth’s downward slide continued, dropping by 0.70%. Darwin experienced the worst losses, slipping by 3% in the same period.
Nevertheless, the Aussie property market is still growing YOY. Sydney and Melbourne continue to drag the entire market on their own. It may be a two-speed market, but every major city, minus Perth, recorded YOY growth.
The Daily Reckoning’s property expert, Phillip J. Anderson, says that Australian real estate is only set to continue growing. He says that Aussie real estate will boom for the next decade.
Phil’s 20 years of experience as a property analyst and advisor has given him a keen sense for where the property market is, and where it’s going. He correctly predicted the 2008 housing market crash. He also went against the trend in 2009, saying that house prices would go on to boom this decade.
He was right on both accounts.
In his latest free report ‘Why Australian Property is on the Verge of a Decade Long Boom’, Phil guides you through this coming decade. He’ll show you the right time to buy property at its cheapest, and how you can use this to time your investments. To find out how to download his free report, click here.
Contributor, The Daily Reckoning