Capital gains welcome news

Capital gains welcome news

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Only three capital cities nationwide recorded incremental increases in home values over September, with a majority of Aussie states and territories recording a fall in values throughout the first month of spring.

The soft September results, according to RP data research head Tim Lawless, are likely to be welcome news to potential buyers and the Reserve Bank following the largest capital gains recorded during winter 2007.

Mr Lawless said the annual rate of appreciation in housing values has been moderating since peaking in April 2014 and added the annual trend of capital growth has been trending lower – an important factor given that the rate of capital gain is no longer accelerating.

“Even though housing market conditions remain very buoyant, we have been seeing the 12-month trend drifting lower since peaking at 11.5 per cent in April,” Mr Lawless said.

“Since the beginning of 2009 we have seen Sydney values increase by approximately 51 per cent, and Melbourne values up by almost 45 per cent … across the state capitals the next highest capital gain over this period has been Perth, where values are up 14.5 per cent.

“When you look back through the cycles of the housing market, the current growth phase isn’t as aggressive as that recorded over previous cycles.”

According to the RP Data September Hedonic Home Value Index results, home values across Australia’s capital cities netted a 2.9 per cent capital gain increase over the third quarter of 2014.

Quarterly capital gains in Sydney were 4.1 per cent, and Melbourne 3.7 per cent. Adelaide posted a 3.1 per cent gain, Brisbane 0.6 per cent, Darwin and Canberra 1.4 per cent, with Perth and Hobart recording a 0.6 per cent and 1.0 per cent decline in capital gains respectively.  

Mr Lawless said what concerns him about the Aussie market is the current ratio of housing debt to disposable income has reached a "record level" of 137 per cent, with investor concentrations on inner-city unit markets across Sydney and Melbourne.

“The Reserve Bank has recently highlighted the risks that are becoming more evident in the Sydney and Melbourne housing markets and therefore it is no surprise the Reserve Bank, together with APRA, is now contemplating the likelihood of introducing macro-prudential tools to reduce some of the exuberance in the housing market and rebalance investor demand without having to resort to monetary policy,” Mr Lawless said.  

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