Median house prices for the 2013 year have ended the December quarter on a strong note with the year on year median prices positive in every Australian capital city.
The strongest median house growth figures were in Sydney, where overall prices were significantly up on the previous calendar year. Standout suburbs such as Double Bay and Birchgrove in Sydney have recovered to almost double their value from previous depressed levels according to Australian Property Monitors.
However this strong Sydney showing comes after a relatively long period of price stagnation and we anticipate growth to continue at a more modest level during the coming year particularly with vacancy rates softening.
Melbourne and Perth also sustained strong growth figures of 8% and 8.4% respectively.
Brisbane which currently is attracting the interest of a number of commentators and investors sustained a modest growth of 5% for the year ended 2013.
The question remains which of these markets have reached their full growth potential, given the dramatic growth in the Melbourne market over a 5 year period to reach a new record median price for the city of $568.824.
Sydney continues to be Australia’s most expensive city with 66% of suburbs in this city having a median house price over $1 million. At the same It should be noted that rents are also higher, with vacancy rates at a competitive level, giving Sydney an edge for cashed up investors looking for strong yields.
Much of Australia’s housing price growth has been influenced by the record low interest rates and investor participation in turn being driven by competition between the banks and mortgage brokers to secure new clients and some relaxing of the rules around self managed super funds.
The economic outlook for 2014 with a weaker Australian dollar and anticipated higher unemployment figures should combine to keep housing growth to a more sustainable level, possibly around 4%.
However NSW continues its chronic accommodation undersupply in Sydney and the need for sustained accommodation growth (where people wish to live) in each of the eastern states continues to make housing attractive to the medium to long-term investor.
In a recent article in The Australian newspaper, demographer Bernard Salt points out that in the year to June 2013 Australian population grew by 407,000, nearly 100,000 greater than in the previous two years.
Not all of this growth has come from immigration, almost half has come from natural population increases and as the younger Gen Y’s are beginning to leave home in increasing numbers they will be feeding into those inner suburbs close to lifestyle and employment.
We may be looking at a quieter housing growth year, but the fundamentals still hold true for housing and well situated existing units.