This article is from the Australian Property Journal archive
Sydney and Melbourne house prices have bucked the trend and showed a slight improvement in the June quarter, according to the latest figures.
According to the mortgage insurance provider PMI, Sydney and Melbourne, which had experienced negative or flat quarterly growth in the March quarter recorded price growth.
The PMI Residential Property Update September 2006 found that in the June quarter 2006, Sydney’s median house price rose 1.2% to $523,000 in the June quarter 2006 – suggesting that the market may have finally bottomed out after consistent quarterly declines since March 2004.
In Melbourne, the median house price rose 5% to $375,000 in the June quarter 2006 and is 4.2% higher when compared to a year ago.
However, PMI warns that any potential recovery in Sydney could be dampened by the August 2006 interest rate rise and further anticipated rises over the next year, which could result in another relapse in prices.
In Melbourne, PMI said given the rising home loan activity over 2005/06 and improved overseas migration, the underlying trend is likely to be positive.
In Brisbane, median house prices rose less than 1% in the quarter, reflecting annual growth of 3.5%.
Further growth of around 4–5% is expected over 2006/07, driven by outperforming economic growth, high net overseas and interstate migration inflows and increased lending activity.
Adelaide’s median house price has been relatively static since 2005/06. The June quarter 2006 median of $286,500 represented a rise of just under 3% for the year. Price growth in 2006/07 is expected to remain limited as rising interest rates have a dampening effect on demand.
Perth’s median house price rose 8.2% in June 2006 to $395,000 and 33.9% for the year, making it the second most expensive capital city in the country.
PMI said while a boom sensibility, together with strong underlying demand is expected to underpin further albeit more moderate price growth in 2006/07, there is a risk that further rises in interest rates could trigger a change in sentiment by home buyers.
A booming resource sector has also boosted demand and price growth in Darwin, where the median house price 4.5% to $350,000 for the quarter and a 25.1% rise for the year.
PMI said price growth is expected to moderate in 2006/07 as affordability constraints begin to have an impact.
In Canberra, the median house price rose 1.3% to $380,000 and is 7.8% higher for the year.
PMI said the decline in median house prices in 2004/05 helped to make housing more affordable, possibly resulting in the return of a net interstate migration inflow and increased loan activity that pushed prices up in 2005/06. Further modest growth is expected in 2006/07, limited by rising interest rates.
The only city to record a fall was Hobart, where the median house price fell 1.9%, however remains 6.5% higher for the year.
PMI said although new loan activity appears to have improved over the course of the year, this follows two years of declines and remains weak.
PMI added assuming the continuation of positive conditions, price increases in these cities are expected to remain solid for the remainder of 2006 and into early 2007.
“Little change in prices is expected in Sydney, Melbourne, Adelaide, Canberra and Hobart. The lower price growth of the past two years (or declines in the case of Melbourne and Canberra in 2004/05 and Sydney in 2004/05 and 2005/06) indicates that affordability has reached its upper limit, with little potential for future substantial gains in the short term.
“Further interest rate rises will continue to offset any benefits gained from wage rises,” PMI concluded.
By Kathryn O’Meara and Nelson Yap
