According to the RP Data CoreLogic Home Value Index, dwelling values across Australia's capital cities increased by 1.0 per cent over the month of October. The data highlights that despite a slowdown in growth in September, values continued to rise, increasing by 2.2 per cent over the past three months.
Dwelling values rose by 2.2 per cent over the three months to October 2014, however only half of the capital cities actually recorded an increase in values. According to RP Data research director Tim Lawless, this result highlights weaker housing market conditions outside of Australia's largest cities.
According to Mr Lawless, Sydney, Melbourne, Brisbane and Adelaide were the only capital cities to record an increase in home values over the past three months. He said that Perth and Canberra have clearly moved through the peak of their growth cycles.
"Looking at the increase in home values over the 12 months to October, it is clear that the rate of capital growth is continuing to moderate. Despite the annual rate of value growth slowing, all capital cities have still recorded an increase in home values over the past year. Home values across the combined capital cities have increased by 8.9 per cent over the twelve months ending October '14, which has slowed from a peak of 11.5 per cent in April of this year," said Mr Lawless.
Sydney and to a lesser degree Melbourne, continued to be the main drivers of the increase in home values. Over the past year, Sydney home values were 13.1 per cent higher, while Melbourne values were up 8.9 per cent.
Mr Lawless said, "Despite the fact that the annual increase in home values is slowing, other indicators remain strong."
Auction clearance rates continued to hover around the 70 per cent mark week-to-week while volumes across RP Data real estate agent and valuation platforms remained strong, indicative of heightened levels of industry and mortgage market activity. The number of new properties listed for sale continues to rise as does total listing numbers. However, Mr Lawless believes that the fairly rapid rate of sale is resulting in a slower increase in total listings than new listings.
Conditions across capital city rental markets remained subdued, with weekly rents rising by only 1.8 per cent over the past twelve months; the lowest annual change in capital city rents since the year ending August 2003.
According to Mr Lawless, the consistent over performance of dwellings values compared with dwelling rents has been compressing yields.
"With rents being substantially outpaced by dwelling values, the rental yield scenario is slimmest in Melbourne where the typical house is achieving a gross yield of just 3.3 per cent while Sydney's average yields aren't a great deal higher at 3.7 per cent.
"Darwin and Hobart are showing a much healthier yield profile with the typical dwelling providing a gross yield of 5.4 per cent and 5.9 per cent respectively," Mr Lawless said.