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RP Data August 2014 Results: Melbourne and Sydney lead winter house price surge; Since 2009 we have seen values rise by 50% in Sydney and 46% in Melbourne
Topic Started: 1 Sep 2014, 11:52 AM (822 Views)
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Melbourne, Sydney lead winter house price surge

September 1, 2014 - 10:35AM
Mark Mulligan

Capital city housing markets had their best winter since just before the run-up to the global financial crisis, according to figures released on Monday by RP Data.

According to the company's Home Value Index, prices for capital city dwellings rose 4.2 per cent over the three months to the end of August, the strongest winter growth since the same time in 2007.

The surge was once again driven by the Sydney and Melbourne markets, which clocked increases of 5 per cent and 6.4 per cent, respectively, according to RP Data.

Canberra was next with a rise of 2.1 per cent, while all the other state and territory capitals posted rises of 1.5 per cent or less or, in the case of Darwin and Hobart, slight contractions.

RP Data research director Tim Lawless says surging property values in Australia's two biggest cities have been a feature of the property landscape for more than five years.

"Over the latest growth cycle we have seen Sydney dwelling values increase by 27.2 per cent and Melbourne values up by 19.5 per cent," he said.

"Sydney and Melbourne were also the strongest performing cities during the 2009-10 growth cycle.

"Since the beginning of 2009, we have seen values rise by a cumulative 50.1 per cent and 46.1 per cent, respectively, in Sydney and Melbourne," Mr Lawless said.

He forecast another strong house auction season, which officially got underway at the weekend.

Read more: http://www.smh.com.au/business/melbourne-sydney-lead-winter-house-price-surge-20140901-10atwd.html
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David Llewellyn-Smith says the endgame is near:

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Attached to this post:
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Edited by Dr Watson, 1 Sep 2014, 12:13 PM.
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt — Bertrand Russell
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Record housing investment boom accelerates

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New data shows Australia’s immense investment-backed speculative housing boom, which is now as big as the last investment “bubble” in 2003, has continued at a ferocious pace over the past 3 months even in “seasonally-adjusted” terms.

Index data provided to The Australian Financial Review by RP Data, which is the nation’s largest property information supplier, show that after stripping out seasonality in price movements home values across Australia’s 8 capital cities still climbed at a 15 per cent annualised clip over the 3 months to 31 August (representing a remarkable 3.6 per cent quarterly growth rate).

In August these double-digit gains persisted with national dwelling values jumping by 1.1 per cent in monthly seasonally-adjusted terms.

The boom has been led by investors in Sydney and Melbourne where dwelling values have registered 13.8 per cent and 21.2 per cent annualised capital growth, respectively, over the quarter ending 31 August after seasonal influences.

In the month of August Sydney and Melbourne home values also leapt by a sharp 1.6 per cent and 1.1 per cent, respectively.

Investors leveraging off the cheapest mortgages rates in history now account for as large a share of all new housing finance commitments as they did during the speculative craze that caused concerns for the Reserve Bank of Australia in 2002 and 2003.

Analysis by the Financial Review finds that over the 12 months to 30 June 2014 investors made up nearly 39 per cent of new housing finance commitments, which is an almost identical level of participation to that recorded at the peak of the early 2000s boom. It also makes the housing boom over the last year very different to its predecessors in 2007 and 2010.

Investment demand is being fuelled by an unprecedented influx of foreign buyers, which UBS says make up about 40 per cent of all newly developed homes in Sydney and Melbourne, and the $560 billion self-managed super fund sector, which can now leverage its cash five times when purchasing properties. In 2002 and 2003 these two forces were not in play.

Read more: http://www.afr.com/f/free/blogs/christopher_joye/record_housing_investment_boom_accelerates_LFmrGSAXr2YBcFBoOhRXIK
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Local
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I am slowly starting to accept the reality that property is a religion in this country and the only “investment” in many people’s head. We bears seem to be a very small minority.

When a petition so well executed as this one

https://www.change.org/p/senator-nick-xenophon-scrap-your-dangerous-and-self-serving-plans-for-first-home-buyers-to-use-superannuation-for-housing-deposits-and-instead-push-for-the-real-solutions-to-housing-affordability

Can only get 650 signatures but a petition to scrap Jetstar 8 dollars booking fee over the internet get over 100 thousand… I look in shock as to why people are not rallying on the streets to demand sanity in the housing market. I mean are we really that happy as a society to pay a million dollars for houses that are falling apart but cannot see that that is the reason that we cannot afford anything else?
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Australia’s housing boom leaves others far behind

Christopher Joye

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With Australian house prices reaccelerating over the last three months after spectacular growth on the back of a speculative investment boom, many people are asking how our frothy market compares to the rest of the world.

So The Australian Financial Review has crunched the numbers, carefully evaluating the performance of the best house price indices across the Western world.

Specifically, we have tracked changes in house prices in Australia, the United States, New Zealand, Britain and Canada since the end of 1995.

We select this period for two reasons. First, the mid-1990s coincided with the big surge in household leverage across Western economies, which was the principal cause of unusually strong house price growth in the ensuing years.

Second, the jump in leverage was itself a function of Western central banks adopting explicit or implicit inflation targets in the mid-1990s, which many believe helped lower inflation and significantly reduce interest rates. The Reserve Bank of Australia argues that the substantial fall in nominal borrowing costs over the 1990s and 2000s drove the once-off jump in leverage and house prices during that period.

Our findings are striking. Since the end of 1995, Australian home values have experienced total capital gains of 283 per cent, massively outstripping any other peer country. The closest competitors are British and New Zealand house prices, which have risen by 194 per cent and 181 per cent, respectively, over the same period. Compared to the US, Australian home values have climbed 2.7 times further.

The same pattern holds if we start the analysis at the end of 1999, which allows us to include Canadian housing data. Canada’s resources-backed economy, which only experienced a dip in house prices during the GFC and is dominated by five strong banks, is often regarded as being quite similar to Australia’s. Yet home values in Australia have risen 34 per cent further than their Canadian counterparts since the end of 1999.

Read more: http://www.afr.com/f/free/blogs/christopher_joye/australia_housing_boom_leaves_others_l57CNLlaz5ktX54axTmaxO
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Capital city housing market records strongest capital gain for winter since 2007

1 September 2014

RP Data CoreLogic Home Value Index Release

According to the August RP Data CoreLogic Hedonic Home Value Index, capital city dwelling values moved 4.2% higher over the three months to the end of August, the strongest capital gain over the three months of winter since 2007.

Capital city dwelling values moved 4.2 per cent higher over the three months of winter, once again driven by dramatic capital gains across the Sydney and Melbourne markets where values recorded a 5.0 per cent and 6.4 per cent lift.

The next best performing city was Canberra where values shifted 2.5 per cent higher over the three month period, driven entirely by a gain in detached house values which compensated for a 2.1 per cent fall across the weaker apartment market. Every other capital city has recorded much more moderate conditions over winter with Adelaide values up 1.5 per cent, Brisbane recording a 1.3 per cent gain and Perth values up 1.0 per cent. A modest drop in values over the winter months was seen across Darwin (-0.6 per cent) and Hobart (-0.8 per cent).

Dwelling values are now 10.9 per cent higher over the past twelve months; however Sydney and Melbourne are the only cities to record double digit growth over the past year.

According to RP Data research director Tim Lawless, Sydney and Melbourne housing markets are driving these two tier conditions. "Over the latest growth cycle we have seen Sydney dwelling values increase by 27.2 per cent and Melbourne values up by 19.5 per cent. Sydney and Melbourne were also the strongest performing cities during the 2009/10 growth cycle. Since the beginning of 2009, we have seen values rise by a cumulative 50.1 per cent and 46.1 per cent respectively in Sydney and Melbourne. Looking at the remaining state capitals over the same time frame, the next best performer was Perth where values are now 15 per cent higher, followed by Adelaide at 9.9 per cent, Brisbane with 5.3 per cent and Hobart where dwelling values are actually 1.5 per cent lower.

"With today marking the first day of Spring, we are expecting listings numbers to rise over the coming month which will provide a real test for the housing market.

"Considering the ongoing high rate of auction clearance rates, a generally rapid rate of sale and the ongoing low interest rate environment, it's likely that dwelling values rise even further over the next three months.

"Consumer confidence is also moving in the right direction now after the post-budget slump which will add fuel to the exuberant buying and selling conditions we have seen during winter," Mr Lawless said.

According to today's results, with rental rates rising at a slower pace than dwelling values RP Data expects to see a compression in rental yields across each of the capital cities. The only regions where yields have moved higher over the past 12 months have been across the Adelaide and Hobart apartment markets.

Across the combined capital cities, the typical gross yield on a house has reduced from 4.1 per cent to 3.7 per cent over the past twelve months.

Mr Lawless said the most significant yield compression is taking place in Sydney and Melbourne.

"Over the past year we have seen Sydney's gross rental yields fall from by 47 basis points, from 4.1 per cent to 3.6 per cent. In Melbourne, where rental yields are even lower, we have seen gross yields fall by 32 basis points over the year to reach 3.2 per cent gross. Given the current rate of value growth and moderate rental growth, it won't be long before Sydney yields have moved below those of Melbourne.

"With yields so low in the cities where values are seeing the largest capital gains, it is clear that investors remain very much focussed on value growth rather than yield."

Investors are currently comprising their largest proportion of new mortgage commitments since late 2003. In fact, investor loan commitments have accounted for more than 38 per cent of all mortgage lending for nine consecutive months, the longest period ever that investment lending has held above that level.

"Investors are mostly concentrated across the Sydney and Melbourne apartment markets where capital gains have been strong but yields have been pushed very low. Potentially there are better investment returns to be had in the smaller capital cities where the growth trend is less mature and yields are also healthier." Mr Lawless said.

Ends.

Key statistics, tables and graphs available in the PDF [600KB].
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