Home values in Australia continue to rise as rental yields slip to new record lows

Home values in Australia continue to rise as rental yields slip to new record lows

The CoreLogic April Home Value Index results out today show the trend for capital gains has dropped from the peaks of 2015 with dwelling values continuing to track higher across each of the capital cities over the first four months of this year.

In April, the pace of capital gains rebounded from the relatively flat numbers recorded in March, with dwelling values increasing by an average of 1.7 per cent across the CoreLogic combined capitals’ index. The latest figures now take the combined capital
city dwelling values measure 3.3 per cent higher over the first four months of 2016.

Across the country, housing market trends remain mixed, however, CoreLogic Research Director Tim Lawless noted that the improvement in the rate of capital gains has been ‘broad-based’ during 2016 with every capital city except Perth recording a lift in
dwelling values over the calendar year to date.

“The results show value growth moved at a faster pace compared with the final three months of 2015 when capital city dwelling values slid 1.4 per cent lower off the back of weaker market conditions in Sydney and Melbourne.”

“While we’ve seen capital gains moderate substantially after peaking last year in Sydney and Melbourne, dwelling values continue to trend higher, just not as fast. The annual rate of growth in Sydney peaked at 18.4 per cent in July last year and has since moderated back to slightly less than half the peak rate of growth, at 8.9 per cent over the most recent twelve month period,” Mr Lawless said.

Index Results as at April 30, 2016


Melbourne’s housing market continues to show a level of resilience to a slowing trend, however the annual growth rate has fallen from a recent peak of 14.2 per cent to the current annual growth rate of 10.1 per cent; Melbourne was the only capital city to see double
digit growth over the past twelve months.

Perth and Darwin remain as the only two capital city markets to experience a decline in home values over the past twelve months, with Perth values down 2.1 per cent and Darwin values 3.7 per cent lower. Mr Lawless said, “With recent month-on-month increases in home values in these two cities, the declining trend rate is now levelling. This may be an early sign that these markets are beginning to find their cyclical trough after more than a year of annual declines.”

Over the current growth cycle, which commenced broadly in June 2012, capital city dwelling values have moved 34.4 per cent higher, led by a 52.7 per cent rise in Sydney home values, and a 37.1 per cent lift in Melbourne values. Mr Lawless said, “This result highlights the two-tiered nature of Australia’s housing market.”

Brisbane experienced the third highest rate of dwelling value growth over the growth cycle to date; dwelling values in the city are now up 18 per cent. According to Mr Lawless, Australia’s regional markets also exhibited a lift in house values over the year to date.
“While house values across the non-capital city markets have generally underperformed compared with the capital city regions, regional house values moved 2.4 per cent higher over the first quarter of the year.”

Download the full report for more information.

Methodology: The CoreLogic Hedonic Home Value Index is calculated using a hedonic regression methodology that addresses the issue of compositional bias associated with median price and other measures. In simple terms, the index is calculated using recent sales data combined with information about the attributes of individual properties such as the number of bedrooms and bathrooms, land area and geographical context of the dwelling. By separating each property comprising the index into its various formational and locational attributes, differing observed sales values for each property can be separated into those associated with varying attributes and those resulting from changes in the underlying residential property market. Also, by understanding the value associated with each attribute of a given property, this methodology can be used to estimate the value of dwellings with known characteristics for which there is no recent sales price by observing the characteristics and sales prices of other dwellings which have recently transacted. It then follows that changes in the market value of the stock of residential property comprising an index can be accurately tracked through time. CoreLogic owns and maintains Australia’s largest property related database in Australia which includes transaction data for every home sale within every state and territory. CoreLogic augments this data with recent sales advice from real estate industry professionals, listings information and attribute data collected from a variety of sources. For detailed methodological information please visit www.corelogic.com.au

by Tim Lawless

Factors that may Impact on the Appraisal Price

When determining price it is also important to take into consideration all relevant information.

Here are some examples of what the Agent must consider:

Demographics of Prospects

Proximity to Transport and Shops

New Development

Educational Facilities

Employment Opportunities

Economic Factors – Interest Rates, Grants etc

Flood and Fire areas

Political Factors (GFC) which affected property prices worldwide

The impact from these events can have an impact on the Appraisal and is subject to change as time progresses and situations change. When viewing properties the Agent will need to take into account the Architectural and Construction Styles as well as all other relevant factors that could affect the Agents opinion of price in that days market.

Real Estate prices can fluctuate, in the past property prices have fallen and many sellers are having to sell for less than what they paid. Providing evidence to support your opinion becomes vital as this can effect the price in which the Owners will be expecting.

Why Agents must Verify Property Owners

Before entering into an agreement the Agent must ensure they are working with the Owner of the property and must abide by the Law in confirming ownership. This is due to two highly publicised incidents in September 2010 and March 2011 which resulted in properties being sold in Western Australia without the knowledge and consent of the lawful Owners.

In both instances Real Estate Agents were contacted by the fraudsters who were acting as the true Owners. The properties were Tenanted and Managed by a Real Estate Agent on behalf of the registered Owner. The fraudsters contacted the Agent, pretended to be the Owners and notified them of new contact details which are now a Legal Requirement when verifying property ownership and description before acting as detailed in the Conduct Standards.

Property Occupations Regulations 2014 Part 5 Conduct Standards

19 Finding out or verifying property ownership and description

  1. Before Auctioning property, an Auctioneer appointed to sell the property must take reasonable steps to find out or verify the ownership of the property and property description.
  2. Before listing property for sale, lease or exchange a Real Estate Agent/Salesperson must take reasonable steps to find out or verify the ownership of the property and property description.