Outlook for 2015-16 financial year – CoreLogic RP Data Research Blog
By Cameron Kusher on June 30, 2015 in CoreLogic RP Data Indices, National Market, Research
So where have we been?
- Over the first 11 months of the 2014-15 financial year, combined capital city home values have risen by 7.5% according to the CoreLogic RP Data Home Value Index. The Index is weighted based on the number of dwellings in each city and looking more closely at the results only Sydney and Melbourne have recorded value rises of more than 4.5% while values are lower in Perth and Hobart. Sydney has been the powerhouse of growth over the current phase, trailed by Melbourne. Meanwhile, the remaining capital cities have recorded very little capital growth despite the very accommodative monetary policy settings. Unsurprisingly, Sydney and Melbourne are also seeing relatively stronger economic conditions and are benefitting from both interstate and overseas migration, as well as the highest levels of interest from offshore investment.
- Over the past year we have seen the housing market become a much more prevalent topic of discussion. Although there is still no Federal Housing Minister we have seen a number of parliamentary inquiries into housing. We have also seen a number of pointed warnings about the heat in the Sydney and Melbourne housing markets from both the Reserve Bank and the Australian Prudential Regulation Authority (APRA). In December 2014 APRA wrote to Australian financial institutions re-iterating what sound lending practices look like and highlighted potential changes for these institutions in the event that these prudent measures weren’t being adhered to. Since then we’ve seen a number of changes to lending practices by lenders.
Where are we headed?
- Looking at what the next 12 months is likely to hold the expectation is that mortgage rates will remain low however; with lenders changing their lending policies, accessing a mortgage may become more difficult. After three years of strong value growth in Sydney and Melbourne we expect growth to continue however, it should start to slow over the year especially as housing supply continues to trend beyond the current record highs. We are already seeing signs of growth in other markets around the country particularly areas like Newcastle and Wollongong adjacent to Sydney as well as certain pockets in Brisbane and the Gold and Sunshine Coasts.
- We would expect the dramatic differential in affordability in these areas relative to Sydney and Melbourne will drive more buyers to these areas.
- On the other hand we are seeing significant signs of weakness in both the Perth and Darwin housing markets along with many of the regional markets linked to the resources sector. These markets are characterised by: slowing value growth or falling home values, falling rental rates, declining sales, increasing discounting levels and time on market and an increase in properties available for sale.
Overall, it looks as though housing market conditions will remain mixed across the country over the next 12 months.
- Sydney and Melbourne are likely to continue to be the stand-outs for capital growth however; we expect that over the year the rate of growth will reduce back to more sustainable levels.
- We may also see a further pick-up in growth in markets such as Brisbane, Newcastle, Wollongong and the Gold and Sunshine Coast.
- Growth in markets such as Adelaide, Hobart and Canberra is likely to remain contained while weakness in mining areas and Perth and Darwin is likely to persist.
For the full story please visit http://blog.corelogic.com.au/2015/06/outlook-for-2015-16-financial-year/