Moderate capital gains amid increased dwelling values

BANKSTOWN, Australia - Aug. 23, 2017 - PRLog -- The residential property market is now responding to higher mortgage rates, stricter credit rules and affordability challenges with capital gains moderating compared to the first part of the year. This is despite most capital cities, including Sydney, reporting an increase in dwelling values except for Brisbane, Perth and Darwin.

The bounce in capital gains could be due to a recovery from the slump in April and May but stamp duty concessions for first home buyers in NSW and Victoria could be making a positive effect on demand. However, despite the higher monthly capital gains, there is a slowdown in quarterly growth from 5% to 2.2% in Sydney and from 5.5% to 4.2% in Melbourne.

The auction clearance rate in Sydney remains below 70% while in Melbourne, its rate remains at the mid 70% range. The residential property market in Melbourne seems to benefit from its high population growth, high jobs growth and more affordable housing compared to Sydney.

Meanwhile, gross rental yields have declined over the month. On dwellings, Melbourne comes at 2.7% while Sydney comes at 2.9%. Gross rental yields have compressed in most capital cities over the past five years, except from Hobart. Sydney has the most substantial decline where dwelling values increased at 77.3% with only a 15.5% increase in weekly rents.

Housing credit has slowed because of higher mortgage rates, stricter lending policies and high household debt levels. It also impacts interest only and fixed rate loans which disincentivise prospective buyers. Discounted variable mortgage rates increased 15 bases points for owner occupiers and 35 basis points higher for investors.

The residential property market in Sydney has a total listing, which is 14% higher than last year, putting upward pressure on prices. Affordability challenges affect buyer demand in Sydney with a median house price of more than $1 million.

What can you do during this period of slow growth?

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Source (https://propertyupdate.com.au/trend-in-capital-gains-losing-steam-despite-strong-monthly-rise-in-capital-city-dwelling-values/?inf_contact_key=8569971895bec5ab3b560294ba3d0f0a7a2ef4d421299414b4f601e127047e6f)