By Craig MacKenzie, executive general manager, commercial at CoreLogic Asia (RP Data)
With the Reserve Bank electing on Tuesday to maintain the cash rate at 2.25 per cent but formally re-communicating a firm bias towards further easing of monetary policy, increased focus is now placed on understanding the impact of this accommodative monetary policy, especially on the hot Sydney property market.
In its media statement, the Reserve Bank noted that "dwelling prices continue to rise strongly in Sydney, though trends have been more varied in a number of other cities over recent months."
The Bank then went on to repeat its March comments that it was "working with other regulators to assess and contain risks that may arise from the housing market."
CoreLogic RP Data released its March Home Value Index results on 1 April. This revealed a three per cent increase in Sydney home values over the month of March, reflecting an increase of 5.8 per cent in Sydney dwelling (houses and units) values over the past quarter and a 13.9 per cent increase in dwelling values over the past 12 months.
The current rate of increased value is unsustainable at present levels, especially with income growth at roughly one third the current level of dwelling value growth in Sydney.
What is often overlooked is the extent to which the Sydney market is playing catch up for a period of relative inactivity between March 2003 and March 2009, when this market underperformed the combined capital cities by an appreciable margin.
This is reflected in the table below, which highlights the Sydney market has been an 'average' performer over the past decade, with Melbourne, Perth and Darwin experiencing stronger rates of growth over this period.
| Capital City | Average annual growth rate of dwelling values over past 10 years (%) |
| Sydney | 4.8 |
| Melbourne | 6.3 |
| Adelaide | 3.6 |
| Brisbane | 3.6 |
| Perth | 6.0 |
| Darwin | 7.5 |
| Canberra | 3.9 |
| Hobart | 1.7 |
The ABS Housing Finance statistics for February are released later today (10 April). Based on activity across CoreLogic RP Data's mortgage valuation platforms in February, the data is expected to reveal strong levels of lending activity in February.
Looking at the Sydney market in particular, the following key points can be drawn:
- Nationally, platform volumes increased by one per cent over the record daily average platform volumes experienced in February, which were 31 per cent higher than January 2015 volumes.
- This increase in March volumes was driven by activity across the Sydney market, which recorded a 14 per cent increase in volumes, after experiencing a 42 per cent increase in volumes in February.
- In absolute terms, the most active segment of the Sydney market was the A$500,000 to $750,000 price bracket, which recorded over a third of the Sydney volume, with activity in this value bracket increasing by 18 per cent over February volumes.
- Interestingly, the top end of the Sydney market showed strong activity in March. Activity in the $1 million to $1.5 million value bracket increased by 35 per cent and activity in the $1.5 million plus value bracket increased by 39 per cent, suggesting that sales and refinance activity in the Sydney market is now spreading to the top end of the market.
In summary, real estate and mortgage market activity remained very strong in March, increasing marginally from the already strong February national volumes and materially in Sydney, particularly in the top end of the market.