The value of residential properties in cities in Australia rose almost 6% in the first seven months of this year, overtaking the last real estate market peak of February 2008, according to the latest figures.
On average properties in state capitals saw values increasing by 5.9% with properties in Darwin seeing the biggest rise of 10.8 %, the figures from residential researcher RP Data Rismark International show. In Melbourne values rose 8.5% and in Sydney property prices were up 6.6%.
Housing prices first edged over the previous peak in June, but by July had breached the previous high by 1.8%, explained Rismark International managing director Christopher Joye.
Researchers said that the strongest population growth since 1971 as a result of increased immigration and a rising fertility rate, along with low interest rates, a resilient jobs market, and a shortage of housing running at a 200,000 undersupply, had underpinned housing values.
The report also points out that Australia’s residential property market has had very few distressed sellers, despite the global economic crisis, and this has helped to keep a floor under prices. For example, mortgage default rates were 0.6% in Australia compared with 5% in the US and 3% in the UK.
Even although there are some factors such as the withdrawal of the first-time buyers stimulus in December, a steepening yield curve that is gradually driving up the cost of fixed-rate loans, and the Reserve Bank’s shift to a tightening bias, that could have an adverse effect on the property market, Rismark International believes that prices will continue rising in the next 12 months.
‘We believe the housing market will grind out further modest gains over the course of the next 12 months,’ Joye said.
Although other analysts have warned that the changes to the first home grant are likely to slow the market. From October 1 the first-home owner grant falls from $14,000 to $10,500 for established homes, and from $21,000 to $14,000 for newly built homes. Then on January 1 the grant falls to $7000 for all homes.
Also new home sales have already slowed, inching up only 0.1% in July, after a 0.5% rise in June, according to the Housing Industry Association.