RP Data research director Tim Lawless says surging property values in Australia‘s two biggest cities have been a feature of the property landscape for more than five years. "Over the latest growth cycle we have seen Sydney dwelling values increase by 27. 2 per cent and Melbourne values up by 19. 5 per cent," he said. "Sydney and Melbourne were also the strongest performing cities during the 2009-10 growth cycle. "Since the beginning of 2009, we have seen values rise by a cumulative 50. 1 per cent and 46. 1 per cent, respectively, in Sydney and Melbourne," Mr Lawless said.
For the big cities, Mr Lawless forecast another strong house auction season, which officially got underway at the weekend. "Considering the ongoing high rate of auction clearance rates, a generally rapid rate of sale and the ongoing low interest rate environment, it’s likely that dwelling values rise even further over the next three months," he said. "Consumer confidence is also moving in the right direction now after the post-budget slump which will add fuel to the exuberant buying and selling conditions we have seen during winter," Mr Lawless said.
The steep price increases, however, had compressed rental yields in Melbourne and Sydney, meaning investors will need to stay focussed on capital appreciation rather than investment returns. "Investors are mostly concentrated across the Sydney and Melbourne apartment markets where capital gains have been strong but yields have been pushed very low," Mr Lawless said. "Potentially, there are better investment returns to be had in the smaller capital cities where the growth trend is less mature and yields are also healthier," he said.
Read more here: SMH