Capital city property values rose 1.9% in June led by gains in Sydney and Melbourne, according to the RP Data-Rismark Home Value Index.
Sydney dwelling values rose 2.7% over June to a median of $580,000 with Melbourne values up 2.3% to $512,000.
The June result means property values ended the financial year up 3.8% regaining all the ground lost over the 2012 financial year, when values fell 3.6%.
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Property values have now recovered 4.9% of the 7.4% correction in dwelling values since the market bottomed out in May last year.
Over the course of the financial year, the strongest performing capital city property markets are Darwin (+6.1%), Perth (+6%), Sydney (+5.6%) and Melbourne (+3.4%).
The weakest markets are Hobart (-1.8%), Adelaide (+0.2%) and Brisbane (+0.6%).
Looking across detached housing, Sydney and Perth house values are up 6.3% over the 2013 financial year with Darwin house prices up 6.1%.
In the unit market, the strongest gains are for Darwin units (+6.4%) and Melbourne (+4.1%).
The June pick-up wiped out the 1.7% cumulative fall over April and May, with values up 0.2% for the quarter.
“The capital gains recorded over the financial year highlight that lower mortgage rates are starting to have a positive impact on the housing market,” says RP Data research director Tim Lawless.
However, he adds that current conditions are “far removed from the buoyant conditions experienced in 2009”.
The quarter-on-quarter results for June were largely driven by a strong result in the largest capital city, Sydney.
Melbourne and Brisbane recorded a slight fall in dwelling values over the quarter while the decline in Hobart, Darwin and Canberra was more significant.
Each capital city housing market excluding Hobart, where values have fallen by -1.8%, has recorded an increase in values over the past year.Annual capital gains have ranged from as little as 0.2% in Adelaide to as much as 6.1% in Darwin and 6% in Perth.
For investors, the highest rental yields are for Darwin houses and units with gross rental yield of 6.2%.
The lowest rental yields are Melbourne houses with gross rental yield of 3.7% and Melbourne units at 4.4%.
Lawless says that while there has been some natural volatility in the month-to-month readings of the RP Data-Rismark Index, the trend is much more indicative of an ongoing recovery in dwelling values.
Rismark International CEO Ben Skilbeck says the index highlights that housing markets do show intra-month and intra-quarter volatility (though very low when compared to the share market).
However, when the index is examined over a longer period, such as the last 3 months, “recent index results highlight that capital gains remain relatively sluggish despite the presence of low interest rates and high auction clearance rates”.
Lawless points out that consumer confidence dipped over April and May before recording a rise in June.
“[However], data on labour markets is jumpy and housing finance data shows hardly any improvement in the average loan size.
“If confidence levels remain high and labour markets continue to show a low rate of unemployment then we would expect that home values will continue to trend higher, albeit at a relatively measured pace,” he says.
This article first appeared on Property Observer.