Home prices keep rising, Melbourne overtaking Sydney

by | Oct 10, 2016 | property

This article was first published by Michael Janda on 3rd Oct 2016 via abc.net.au | Image: The current Sydney and Melbourne boom has lasted longer than the early 2000s. 774 ABC Melbourne: Simon Leo Brown


Home prices continue to rise strongly, with Melbourne taking the lead in growth over Sydney during the September quarter.


Melbourne posted quarterly home price growth of 5 per cent, boosted by a 2.3 per cent rise during the month of September.


Sydney still recorded strong price increases of 3.5 per cent over the quarter, but only 0.8 per cent last month.


On an annual basis, Sydney’s 10.2 per cent price growth is still the nation’s strongest, but Melbourne is closing in at 9 per cent.


CoreLogic’s head of Asia-Pacific research Tim Lawless said affordability constraints are becoming significant in Sydney, in particular.


“Household incomes, typically across New South Wales, are growing at about 4.5 per cent and we’re seeing dwelling values rising at a little bit more than double that pace of growth,” Mr Lawless told ABC News Online.


Mr Lawless said continued home price gains above household income growth are unsustainable.


“You wouldn’t expect this cycle could really last that much longer,” he predicted.



Mr Lawless said there are clear parallels with the property boom of the early 2000s, where Sydney home prices surged between 2000-2004 before levelling off and even dropping afterwards and not recovering until 2009.


“After such a long, and strong, pace of capital gains in this current cycle we would expect there to be a downturn following such strong growth, as we’ve seen after every other growth cycle in the marketplace,” he added.


Canberra (9 per cent) and Hobart (8.7 per cent) are also reporting strong property price inflation, while Adelaide and Brisbane both recorded more moderate growth.


Resources centres hit hard in sell-off

In stark contrast, the resources-driven markets of Perth (-7 per cent) and Darwin (-6 per cent) continued to slide on an annual basis, with no end in sight to the correction.


CoreLogic said both markets have now suffered double-digit falls from their property price peaks.


Tim Lawless said homeowners in these two cities should not expect conditions to improve soon.


“We’re still seeing pretty steep rental falls in both these markets, as well as very high listing numbers,” he observed.


“So probably during sometime in 2017 we’ll start to see these markets levelling out, but I think capital gains are still some way away.”


However, the situation for investors in the mining regions of north-west Western Australia is far worse.


SQM Research data for Karratha shows a 60 per cent slump in asking prices for houses, down to just over $300,000.


Port Hedland asking prices are much higher, at $560,000, but the fall over the past three years is similar at a whopping 54 per cent.


The story is the same in the Queensland coal mining town of Moranbah, where prices have fallen 60 per cent to $209,000.


In all these mining towns, the severe drop in prices has been triggered by a plunge in rents.


Asking rents in Moranbah have close to halved over the past three years as mines close or cut back on workers, while rents in Karratha have plunged more than 60 per cent as mining construction projects wind up.