The Melbourne housing market has been quite resilient to a slowdown, despite higher mortgage rates and tighter credit policies. Overall growth and residential property values remain healthy, but at a combined capital city level it’s not quite as strong as what it was a year ago.
It’s anticipated the market will continue to see values rise, and it’s expected that the rate of growth will continue to slow throughout the remainder of 2017.
We’ve included the Melbourne property market video below, along with a transcript.
Welcome to CoreLogic’s Melbourne Property Market update for August 2017
The Melbourne housing market has been quite resilient to a slowdown despite higher mortgage rates and tighter credit policies.
Melbourne dwelling values were up 3.1% over the month of July and they’ve increased by 15.9% over the past 12 months.
That’s the highest annual growth rate of any capital city.
While the headline figure for Melbourne is certainly strong, the figure hides a significant performance gap between houses and units.
While house values are up 17.2% over the past year, unit values are up by a severely slower pace of 4.%.
Slower growth conditions, at least at a macro level, are being brought about by several factors.
Firstly, it’s clear that investment in the housing market is now tapering. Growth and investment-related credit peaked in November last year, and since that time the pace of lending for investment purposes has been moderating.
Considering investment activity is heavily skewed towards the Sydney housing market, less activity across this segment is likely to have more impact compared with the other capital cities.
Investor appetite is being dampened by higher mortgage rates, as well as tighter credit policies and low rental yields.
Since bottoming out in November last year, discounted variable mortgage rates for investment purposes have risen by 35 basis points and they’re now 60 basis points higher than the same product for owner-occupiers.
Mortgage rates for interest only terms have also moved high in response to the March announcements from APRA that Australian lenders should limit interest on the lending the 30% of new settlements.
These two factors that have created a substantial disincentive for real estate investors.
Add to this the fact that rental yields slipped to new record lows in Sydney and Melbourne during July, and it becomes clear why investment credit growth is trending down.
While these factors are working to slow the housing market, there are other factors that are stoking housing demand.
Population growth has rebounded higher, creating more demand for housing.
Based on data to the end of 2016, the number of net overseas migrants into Australia was up by 1.5%, with 76% of these overseas migrants arriving in New South Wales and Victoria.
Interstate migration flows are also changing which is impacting on housing demand.
The net outflow of residents from New South Wales is now gathering some pace, while net migration into Queensland is the highest in ten years.
The rise in interstate migration is likely to be a key driver of housing demand particularly across the southeast corner of Queensland, while the outflow from New South Wales is probably another reason the housing market is starting to slow down.
Labour market conditions have also tightened during 2017. The past five years saw 75% of Australian jobs created in Victoria and New South Wales, which has supported the high rate of population growth in these regions.
More recently jobs growth has become more broadly spread, picking up across most states and territories.
New first homebuyer stamp duty concessions
Another factor to consider in New South Wales of Victoria is the effect of new first home buyer stamp duty concessions.
As of July 1st first home buyers in New South Wales were exempt from stamp duty when purchasing a home under $650,000 and stamp duty is discounted up to $800,000.
In Victoria, stamp duty exemptions became available for properties purchased with a price tag of less than $600,000 with concessions on stamp duties up to $750,000 dollars.
While it’s still too early to gauge the extent of first home buyer reactions, historically first-time buyers have been very responsive to these types of incentives.
Overall growth and residential property values remain healthy but in a combined capital city level it’s not quite as strong as what it was a year ago.
Though it’s anticipated the market will continue to see values rise, it’s expected that the rate of growth will continue to slow throughout the remainder of 2017.
Of course, the latest research and updates of the housing market could always be found at a CoreLogic website located at www.corelogic.com.au