Rate Cut Results a Huge Rise in Sydney House Prices
Due to low mortgage rates Sydney house prices surge over the first quarter of 2015.
According the CoreLogic RP Data Home Value Index, “Home values across Sydney rose 3% over March, 5.8% over the quarter and 13.9% over the year”. This indicates that the annual home value growth of Sydney suddenly rebound after slowing to 12.4% in December 2014.
Melbourne, which is also counted among the strongest performer, shows a capital gain at 5.6%, which is a much lower level. It implies that Sydney is now the only housing market where dwelling value growth remains in double digits.
“Since home values began their current growth phase in June 2012, dwelling values across the combined capital cities have increased by 24.3% – but most of the growth has emanated from Sydney”, said CoreLogic RP Data head of research Tim Lawless.
It has been seen that dwelling values for Sydney have increased by 38.8%, for Melbourne 23.6%. But the total dwelling value growth over the current cycle has been less than 10% in Adelaide, Hobart and Canberra.
According to Lawless, “However, the surging Sydney market is likely to present a challenge for the Reserve Bank when they deliberate interest rate settings next week”.
He further added, “Despite the headwinds of softer labour markets, very low rental yields, increased oversight on lending conditions and heightened economic uncertainty, historically low mortgage rates appear to be adding further stimulus to the housing market, albeit that stimulus is largely being felt in Sydney”.
“As the Sydney house price growth has been largely fuelled by investor demand, but the investors should be cautious”, he said. Because when the Sydney housing market starts to lose momentum, there is some risk that recent investors could be left holding a very expensive but low yielding asset with a lower than expected rate of capital gain over the coming years.