Sydney led Australian house price growth in 2013 with a 14.5 per cent increase. Photo: Louie Douvis
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Capital city house prices rose by almost 10 per cent last year, the highest yearly growth in four years, as record low interest rates increased buyers’ appetites for residential property.
House prices rose a combined 1.4 per cent last month, led by a 4.3 per cent increase in Hobart and a 2.2 per cent lift in Melbourne, RP Data-Rismark monthly home value index released on Thursday showed.
Capital city housing prices since 2006.
Sydney recorded the strongest yearly growth across the capital cities, with an annual rate of 14.5 per cent in 2013. Perth, the capital city of mining powerhouse Western Australia, saw prices jump by 9.9 per cent, while Melbourne prices increased by 8.5 per cent.
Brisbane prices rose 5.1 per cent and in Canberra, prices grew by 3.5 per cent last year, the data showed.
The strong growth in house prices, coupled with the 2013 sharemarket rally, added to the “wealth effect” story that boosted retail activity towards the end of the year, economists said.
RP data housing statistics.
"Low interest rates and improved housing affordability have released much of the pent-up buyer demand built up over recent years, with rising prices reinstating the incentive to buy now rather than later," ANZ analysts Paul Braddick and Dylan Eades said.
"Population gains continue to outstrip new home supply and an unprecedented shortage of housing will maintain upward pressure on prices, rents and building activity."
The latest data came as negative gearing was put back in the spotlight by the release by the National Archives of Cabinet papers for 1986 and 1987. The papers showed that then treasurer Paul Keating had argued for the abolition of negative gearing, a tax break given to some property owners.
The sharp plunge in first-home buyer activity to record lows in recent months has also sparked a debate about housing affordability in Australia.
It was a year of two halves, with home values rising about 3 per cent in the first six months of the year, and by 6.6 per cent in the second-half of 2013.
“Despite the strongest annual value growth since 2009, the rate of growth was not that startling given the low interest rate environment and the previous successive years in which home values fell,” RP Data’s senior research analyst Cameron Kusher said.
Combined home values fell 0.4 per cent in 2012 and 3.8 per cent in the previous year.
“Cumulatively, from peak to trough, capital city dwelling values were down 7.7 per cent prior to this current growth cycle,” Mr Kusher said.
He added that growth in the property market was expected to remain varied across the capital cities, with further price gains dependent on a expected rise in the unemployment rate and the affordability of property in capital cities where prices have risen the most.
It is also possible that regulatory bodies such as the Reserve Bank and the Australian Prudential Regulation Authority could impose macroprudential tools to cool down the housing market if it moves into what could be deemed as bubble territory.
Commonwealth Bank senior economist Michael Workman said interest rates, which are expected to remain stable at their record lows of 2.5 per cent, would be a positive for affordability.
But he said housing price growth this year may not be as strong as in 2013, and would also be affected by strength of the labour market and the amount of residential property construction activity across the different cities.
“You can see that in the national variations. Hobart’s quite weak as they have had what looks like significant full-time jobs losses across Tasmania ... through 2012 and 2013. So it tends to mean that people have to move to get employment,” Mr Workman said.
“Whereas you get cities like Sydney and Melbourne, where you are getting what appears to be quite good growth in white-collar related employment, and those people who want to live close to the cities tend to pay up to buy properties, and if they can’t buy, they rent.
“In Melbourne, there’s a lot of new construction, and it’s tending to dull the price and rental increases. In Sydney, you’re not getting a lot [of construction].”
- Sydney rose 14.5% to $655,250
- Melbourne rose 8.5% to $563,000
- Darwin rose 3.3% to $540,000
- Canberra rose 3.5% to $530,000
- Perth rose 9.9% to $520,000
- Brisbane rose 5.1% to $445,250
- Adelaide rose 2.8% to $386,000
- Hobart rose 2.2% to $330,000
- Capital city aggregate rose 9.8% to $540,000