Capital Cities Exhibit Value Growth, Rental Decline

Nicola Webber dissects the Australian housing market in an article for the website realestate.com.au. She talks about the value growth in major capital cities and relatively arrested rental yield. Webber also sheds light on how investors might be affected in the present housing climate.

Robust value growth

RP Data figures exhibit steady resilience from house and unit prices across Sydney and Melbourne. Value growth to the tune of 15.6% and 11.6% respectively (year to March) is certainly worth rejoicing. Home value in Sydney is in fact close to 16% higher than its previous highest.

Reduced time-on-market

Sellers are definitely having the time of their lives; what with the time-on-market steadily decreasing. While new listings are being added each year, the total number of listings is falling, indicating the pace at which properties are vanishing from the market.

Diminishing rental yields

Rental rates are not growing as fast as home value leading to diminishing rental yields. It is because the value growth is expected to be robust that we can witness further fall in rental yields, especially in Sydney, Melbourne and Perth.

Buy in cities with weaker growth

Now is not the time for investors to look for a pie in these capital cities. Prices are close to their peaks and they are not likely to bottom out any time soon. Webber recommends purchases in other cities which are relatively languishing. These cities, along with a few regional centres, propose a good deal presently.

Two things can halt the march of value growth. First is if the interest rates begin to move north. Increase in rate of unemployment is another thing the property market needs to be wary about.

You can read the original article here.

Household income

In my opinion, growth registered by properties needs to be read in the light of nominal GDP. We feel squeezed because we immediately imagine the kind of prices we needed to pay, say, a decade ago. We fail to absorb that while prices have increased by 66.7% over the last ten years, household income has also shot up by 70.6% within the same time-frame. Our purchasing power has thus remained more or less unaffected.

Sydney has definitely posted phenomenal value growth but there are still areas where you can buy relatively cheap. All you need is a seasoned buyer’s agent by your side. I will be only glad to assist you.