The value of Australian residential property has exceeded $5 trillion for the first time, as the price of Australian homes increased in all capital cities in the December quarter.
The price of homes across all eight capital cities rose 3.4% in the quarter, resulting in a 9.3% total increase over the past 12 months, according to new figures from the Australian Bureau of Statistics.
Established house prices rose 3.5%, while attached dwellings increased 3%.
Australian Property Monitors senior economist Andrew Wilson told SmartCompany the upsurge in value is “no surprise”.
“There’s been a very strong period in the housing market in the past 12 months and a solid performance from most economies,” he says.
“Sydney has 163 suburbs now with a median house price over $1 million. That’s 20% of suburbs, so it’s no surprise the value of property overall has skyrocketed.”
Residential Property Price Index director Robin Ashburn said in a statement Sydney is driving the value growth.
“Sydney continues to grow at the fastest rate across the country, with house prices rising 4.9% in the December quarter 2013,” she says.
Perth houses also recorded solid growth in the quarter, up 3.5%, while Brisbane properties increase 3% and Melbourne and Adelaide rose 2.8%.
Darwin and Hobart also posted reasonable gains, increasing 2.7% and 2.3% respectively, but Canberra remained flat, only rising 0.4%.
Wilson says overall Sydney has been the main driver of the growth in house price value over the past 12 months and says on most counts it’s the most expensive capital city to live in.
“When measuring a suburb’s expensiveness, we look firstly at medians. Sydney currently has the highest median house price at $760,000, while Perth comes in second on $605,000,” he says.
“Other measuring factors include the number of million dollar median suburbs. Sydney has 163, while Perth has 29.”
Wilson says another measure of expensiveness is access to the market.
“This one’s for the lower end. Sydney has 40 suburbs with a median price below $400,000 because it does have some rough suburbs,” he says.
“Looking at the number of first home buyers in the market though, the Sydney and Brisbane markets have been quiet for some time, but this is expected to pick up. Whereas in states like Western Australia and South Australia, the proportion of first home buyers in these markets remain about the long-term average, so this means the market is less expensive for first home buyers.”
The average price of Australia’s 9.3 million residential properties is now $539,000, an increase of 42,600 in 12 months, according to the ABS.
But Wilson says the value of the Australian property market is constrained, despite the recent rapid growth.
“The growth in house prices is constrained by income growth, which is a reflection of what’s happening in the broader national economy, which in turns reflects the international economy,” he says.
“Prices growth certainly has a liming in the medium term, although in the short-term it can be unaffected by the underlying fundamentals.”
Wilson says factors like unemployment and wage growth dictate the direction of house prices.
“While Sydney is pushing up the prices growth, these high levels are not sustainable in the medium term because the economy can be described as uneasy.”
Other figures released yesterday revealed the value of total dwelling commitments increased a minimal 0.2% in December, seasonally adjusted.
The value of owner-occupier housing commitments dropped by 1.5%, seasonally adjusted.
The current percentage of first home buyers in the market increased to 12.7%, up from 12.3%, but this still remains significantly lower than the long-term average of around 20%.