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RP Data July 2014 Report - House Prices Still Strong - Sydney up 25% in two years
Topic Started: 1 Aug 2014, 02:19 PM (932 Views)
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Home prices still strong in July: RP Data

August 01, 2014 11:30AM

Sydney home prices have risen almost 25 per cent in the last two years but growth is now beginning to ease to more sustainable levels.

Capital city home prices have risen 10.2 per cent in the 12 months to July, having trended higher since June 2012, according to the RP Data-Rismark home value index for July.

The top performer for capital gains has been Sydney where prices were up almost 25 per cent in the last two years, while Darwin and Melbourne have recorded rises of 20.4 and 18.5 per cent respectively.

Despite the continued rise, the growth trend had eased from last year's peak to a more sustainable level, said RP Data research director Tim Lawless.

He said growth in mortgage demand had started to ease, suggesting buyers were being put off by the rising home prices as well as low rental yields.

Rental yields fell in July, with capital gains continuing to outpace rental growth, the report said.

"Despite the low yielding environment, the total returns on housing have been strong thanks to the level of capital gains," Mr Lawless said.

"With interest rates remaining low and fixed rates seeing further downwards pressure, we are expecting that capital gains will continue into the foreseeable future.

"What is likely though is that the rate of capital gain will continue to reduce, particularly in those cities where affordability constraints are the most significant and rental yields are the lowest."

Low rental yields in Sydney and Melbourne would act as a disincentive to investors, Mr Lawless said, while affordability issues in Sydney would drive buyers towards apartments and townhouses close to the city rather than detached houses.

Read more: http://www.theaustralian.com.au/business/latest/home-prices-still-strong-in-july-rp-data/story-e6frg90f-1227009853962
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b_b
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Up 25% in two years.

So anyone who bought in Sydney mid 2012 with 80% LVR would have (roughly) a 100% ROE by now. Not bad.

What was the advice given to young people in 2012?

David Collyer's advice in 2012

My absolute favourite bit starts at 2.50 mark.....


Edited by b_b, 1 Aug 2014, 02:35 PM.
(S – I) + (T - G) + (M - X) = 0
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Dam
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b_b
1 Aug 2014, 02:29 PM
Up 25% in two years.

So anyone who bought mid 2012 with 80% LVR would have (roughly) a 100% ROE by now. Not bad.

What was the advice given to young people in 2012?

David Collyer's advice in 2012
Yeah, the month I bought my first property, July 2012, I was reading the first "paying" newsletter form macrobusiness, and they were confident of the market loosing something like 20% by year end.I was not too sure of my move ;-)

Glad I did not listen these idiots
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Shadow
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House Prices Still Strong - Sydney up 25% in two years
Two years ago Crazy Ted appeared on APF telling us how he had just sold his Sydney home because of the coming crash, and hurling abuse at anyone who dared suggest Sydney prices might rise instead of crashing. Crazy Ted told us we were idiots to be still holding Sydney property. Apparently the smart money at the time was pouring out of Sydney property and into gold, which was set to hit $5000 by 2014...

Posted Image
Edited by Shadow, 1 Aug 2014, 02:37 PM.
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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Admin
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Sydney and Melbourne continue to drive two tier housing market conditions in July

1 August 2014

RP Data – Rismark Home Value Index Release

The RP Data Rismark July home value indices results out today confirmed that Sydney and Melbourne continued their strong capital gains trend, with dwelling values rising 2.0% and 1.8% over three months ending July 2014, taking dwelling values across the combined capital cities index 1.1% higher over the three month period.

Capital city dwelling values were 1.1 per cent higher over the three months ending July, taking the aggregate capital gain to 5.0 per cent for the year to date across the combined capital cities. The gain was mostly centred in Sydney, Melbourne and Canberra where dwelling values rose 2.0 per cent, 1.8 per cent and 2.1 per cent respectively over the rolling quarter to offset the falls recorded in other capital cities. The Darwin market also recorded a capital gain over the past three months (+0.8%) while the remaining capital cities all recorded a drop in values (Brisbane -0.4%, Adelaide -2.6%, Perth -0.1%, Hobart -1.2%).

Broadly, capital city dwelling values have trended higher since June 2012; since that time the combined capitals index has recorded a cumulative gain of 17.4 per cent. The absolute standout performer for capital gains has been Sydney where values have moved almost 25 per cent higher over this time. Darwin and Melbourne also recorded stellar results with values up 20.4 per cent and 18.5 per cent respectively over the growth cycle to date.

The lowest rate of capital gain over the current cycle was in Adelaide where values are just 5.5 per cent higher, and in Canberra where values have recorded a 7.9 per cent increase.

According to RP Data research director Tim Lawless, despite the most recent set of data showing a rise, the growth trend has eased from the peak conditions recorded last year. Over the past six months, capital city dwelling values moved 3.7 per cent higher compared with the peak rate of growth of 7.2 per cent which was recorded over the six months ending November last year. Mr Lawless said that over a similar time frame the growth in mortgage demand has started to ease, suggesting buyer demand may be being dampened by rising affordability hurdles and low rental yields in the largest cities.

Regional markets continued to languish and recorded a -0.7 per cent fall over the June quarter and a year on year growth rate which is slightly higher than inflation at 3.5 per cent. "Regional markets are of course diverse and range from agricultural regions which are largely driven by weather conditions and export factors, mining and resource-centric areas where the downturn in commodity prices and fewer major infrastructure projects are generally causing weak housing market conditions, and lifestyle markets where buyer demand is bouncing back and values are generally rising," Mr Lawless said.

Examination of the housing market across broad price segments revealed that the most expensive quarter of the combined capital city housing market has shown the highest capital gains over the past year. Dwelling values across the most expensive quarter of the capital city market are up 10.8 per cent over the past twelve months compared with a 7.9 per cent gain across the most affordable quarter of the market, and a 10.1 per cent capital gain across the broad middle of the market.

Rental yields were down over the month, with capital gains continuing to outpace rental growth. The typical gross rental yield on a capital city dwelling fell to 3.9 per cent in July, from 4.0 per cent in June, with Melbourne yields the lowest of any capital city at 3.4 per cent gross, followed by Sydney at 3.9 per cent gross.

"Despite the low yielding environment, the total returns on housing have been strong thanks to the level of capital gains," Mr Lawless said. The RP Data Rismark Accumulation index, which combines the level of capital gain with gross rental returns, is showing a 14.7 per cent total return over the past twelve months, led by Sydney at 19.5 per cent and Melbourne at 14.9 per cent. The lowest total returns have been recorded in Hobart and Canberra where the combination of capital gains and rental yield have provided a 6.5% gross return across both cities.

According to Mr Lawless, the housing market is set to record further capital gains, however he said that it is likely that growth rates will continue to taper in trend terms back to a more sustainable level. "With interest rates remaining low and fixed rates seeing further downwards pressure, we are expecting that capital gains will continue into the foreseeable future. What is likely though is that the rate of capital gain will continue to reduce, particularly in those cities where affordability constraints are the most significant and rental yields are the lowest."

"Low yielding market conditions in Sydney and Melbourne are likely to act as a disincentive to investors, as well as the fact that these markets are well advanced in their growth cycle. Additionally, with affordability becoming a more pressing issue in Sydney we would expect buyers to be seeking out medium to high density dwellings located close to the city rather than where they could afford to buy a detached home. The most affordable suburbs across the capital cities are generally showing the lowest capital gain over the past year suggesting buyer demand many be held back by price barriers.

"Any slowdown in market conditions will be a gradual one. Auction clearance rates are holding firm and homes are generally selling quickly, compounded by a slowdown in the number of homes being advertised for sale.

"The real litmus test for the market will be how much buyer demand is apparent during the Spring Selling Season. Winter has seen above average auction clearance rates however, as listings inevitably rise sharply over the coming months this will create the greatest test for the Sydney and Melbourne housing markets in terms of how strong value growth will be," Mr Lawless said.

Ends.

Key statistics, tables and graphs available in the PDF [600KB].
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John Frum
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An all out bull assault on Sydney - detached from fundamentals and flying out of control.

Just as I called it a month ago.
"It were not best that we should all think alike; it is difference of opinion that makes horse races." - Mark Twain on why he avoids discussing house prices over at MacroBusiness.
"Buy land, they're not making any more of it." - Georgist Land Tax proponent Mark Twain laughing in his grave at humourless idiots like skamy that continually use this quip to justify housing bubbles.
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