Price gap narrows between Melbourne and Sydney: Domain

The median house price in most capital cities rose over the December quarter, according to the latest Domain House Price Report. 

Weakening investor activity and tightened lending conditions continue to impact Sydney, but Domain reported a slight increase over the December quarter.

Sydney prices in the NSW capital still sit lower than six months ago.

Meanwhile Melbourne exceeded a median of $900,000 for the first time narrowing the gap between Sydney and Melbourne to a three-year low.

Brisbane and Darwin were the only two capital cities to record median house price decreases over the quarter. 

Median unit prices varied across the capital cities, with an oversupply of units that continues to impact Brisbane and Darwin.

Hobart recorded the strongest annual growth in units over the December quarter, followed by Melbourne, Adelaide, Sydney and Canberra. 
 
The national median house price increased by 1.4% over the December quarter to $813,024, while the annual rate of growth has slowed to 5%, the lowest in 15 months.  

Capital city unit markets reported a minor price growth over the December quarter, increasing by 0.3% to $557,794.

Unit growth across the capital cities slowed to a 15-month low of 2.3%.  

Sydney 

“A varied level of price growth across all capital cities was reflected in both the national median house and unit prices this quarter. Overall, prices rose marginally in the three months to December but the slower pace has weighed down the annual growth to its lowest rate since September 2016,” said the newly installed top spokesperson, Domain data scientist, Dr Nicola Powell. 

House prices in Sydney increased marginally by 0.5% over the December quarter, reaching $1,179,519. Following a recent price decline over the September quarter, Sydney’s median house price remains lower than it was six months ago, with annual growth slowing to 4% year-on-year.  

Sydney’s unit prices decreased slightly to $736,879, a 0.4% drop over the quarter. Annually, units in Sydney grew 1.7%, a 15-month low for the capital city.  

“House prices in the Harbour City continue to moderate in line with an investor activity slowdown, and first home buyer participation rates are at their highest level in six years as entry-level buyers respond to State Government incentives,” said Powell. 

“Sydney’s double-digit growth phase appears to be in the rear-view mirror, and with no further rate cuts in sight, the market may continue to moderate in 2018. Demand is likely to weaken, as the heightened investor activity that Sydney has experienced is unlikely to be significantly offset by the rising number of first home buyers.” 

Melbourne

Another quarter of solid growth has pushed Melbourne’s median house price to $903,859, exceeding the $900,000 mark for the first time and narrowing the median price difference between Melbourne and Sydney to a three-year low. House prices in Melbourne grew 3.2% over the quarter and 11.3% over the year, resulting in Melbourne’s fifth consecutive quarter of double-digit annual growth.  

Similarly, Melbourne’s unit market delivered strong results over the December quarter, increasing by 2.8% to reach a record high of $506,079. This reflects a healthy 8.0% annual price jump, the strongest annual gain for the Melbourne unit market in seven years.  

“As investor activity retreats and the housing market adjusts to tighter lending standards, it remains to be seen whether Melbourne’s remarkable price growth will continue. However, steady population increases and government incentives may support ongoing demand as the year unfolds,” said Powell. 

“Similar to Sydney, first home buyer numbers in Melbourne have risen, recording its highest level of activity since 2009. This can be attributed largely to the Victorian government’s entry-level buyer incentives. In the coming months we are likely to continue to see a higher demand for entry-level homes, helping to drive price growth at the lower end of the market, as well as support regional price movements throughout the state.” 

Brisbane

Over the December quarter, median house prices in Brisbane decreased slightly by 0.6% to $548,918, the second consecutive quarter of decline for the capital city. This has slowed the annual price growth to a margin increase of 0.4% year-on-year, the lowest rate of advancement in five years.  

Brisbane’s heightened supply continues to impact price movement in the unit market, with units recording a decline of 2.2% over the December quarter to $385,955 — a 4.5% drop compared to last year. Unit prices in the capital city are now at a four-year low.  

“Brisbane offers a large inventory of houses and units that fall under $500,000, and interstate migration has fuelled the Brisbane market over the past two years as out-of-state buyers head to the Sunshine State in search of a lower price point,” said Powell.  

“The surge of new apartments in Brisbane remains ahead of the demand, and although this continues to impact unit prices, population increases and a slowdown in new development starts and completions may work together to help balance the market.” 

Adelaide 

Adelaide house prices rose slightly by 0.9% over the December quarter to reach a median price of $522,815. This reflects a 3.5% increase year-on-year. 

For the second consecutive quarter, Adelaide’s median unit price of $315,794 is the most affordable of the capital cities. A heightened level of supply continues to undermine Adelaide’s unit prices, which declined by 1.6% over the quarter — the second steepest quarterly decline after Brisbane. However, unit prices are up 2.0% over the year. 

“Adelaide has avoided the extreme price surges impacting Australia’s east coast markets. Its steady pace of growth and diverse coastal lifestyle makes it a reliable location for buyers heading into 2018,” said Powell. 

Perth 

A marginal 0.5% increase over the December quarter has pushed Perth’s median house price to $557,567 — 2.5% lower than the previous year. 

Lower levels of construction have buffered the local unit market in Perth, which improved by 1.0% to reach $369,402 over the quarter. However, year-on-year the city recorded a 1.7% drop. 

“After multiple consecutive quarters of house price declines and fluctuating unit prices, the Perth market is showing signs of growth. The annual pace of decline in Perth house prices has slowed compared to the steeper falls recorded in 2016, and the annual unit price decline is at its lowest in almost three years,” said Powell.  

“Perth’s housing market outlook for 2018 depends largely on whether the city’s economy and population track upwards throughout the year.” 

Canberra 

Houses in Canberra reached a record high median price of $753,516 in December, recording a 5.0% quarterly increase and an 8.4% annual increase. 

Canberra unit prices are beginning to show signs of recovery increasing for the second quarter by 0.1% to $426,124 in the three months to December. This is 0.4% higher than last year. 

“Canberra house prices have been tracking upward for 15 consecutive months, delivering the second-best performance this quarter after Hobart. Renewed buyer and seller confidence has provided the nation's capital with a substantial price boost that will likely continue throughout 2018,” said Powell.  

“Housing finance, retail trade and strengthening business confidence has been key to driving the ACT economy, in addition to spikes in tourism, infrastructure and capital initiatives have stimulated business, contributing positively to the economy.”

Darwin 

Darwin recorded its second consecutive quarter of negative price movement, falling by 2.6% and reaching an eight-year low of $565,696 over the December quarter. This follows an annual decline of 7.4% over the year. 

Although median unit prices in Darwin remain 14.0% lower than last year, the unit market spiked over the quarter, jumping 9.3% to reach a median of $395,279. This is the highest quarterly price increase of all the capital cities. 

“Darwin was the only capital city to record a median house price decline over the quarter and over the year, and a strengthening in the local market depends primarily on the state of the economy as we head into 2018,” said Powell.  

“Despite the recent uptick in prices, annual trends in Darwin’s unit market are still on double-digit decline. The oversupply of unit stock in the city is impacting the market, and price drops have been a consistent trend for Darwin since December 2016.”

Hobart 

Over the December quarter, Hobart house prices surged 10% to a record high median of $443,521. Hobart was the only capital city to record double-digit growth quarterly and annually, with a 17.3% increase year-on-year. 

Despite a minor decline of 0.8% over the quarter, unit prices in Hobart jumped 14.2% to reach a median of $318,467. Hobart recorded the strongest annual growth of all capital cities in both houses and units. 

“It has been over a decade since Hobart experienced such a surge in house prices over a quarter, and the capital city’s results over the December quarter highlight the growing demand for homes in the Tasmanian capital,” said Powell. 

“Despite the surges in price, Hobart still has the lowest median house price of all the Australian capital cities, and it remains a great option for buyers seeking an urban lifestyle with an affordable point of entry.”