Best value markets lead the way in percentage capital growth, CoreLogic data reveals

According to CoreLogic’s Head of Research, Eliza Owen, some of the best value markets have topped the league tables when it comes to percentage capital growth. However, analyzing growth by dollar value provides a new perspective on how value changes over time.

“Armadale in the south east suburbs of Perth has a median dwelling value of $609,672, and values have risen a whopping 28.6% over the past year. Each of the top 10 SA3 markets with the highest growth rates were in Perth and Brisbane,” Ms Owen said.

Despite the impressive percentage growth in Armadale, the equivalent uplift in the median value is around $136,000, which pales in comparison to some of the dollar value gains in the higher end of the market. For example, in Sydney’s Warringah, home values rose 14% in the past 12 months, equating to a rise in the median home value of $254,000, topping the list of dollar value gains.

However, Owen cautioned that the high end of the market may not be the best option for investors seeking capital gains due to its lower accessibility, higher transaction costs, and the need to concentrate more money in a single asset.

“The lower-priced end of the market is where we’re generally seeing higher rates of capital growth. That’s obvious when you look at the ‘lower quartile’ home value index for the combined capitals, which tracks value change in the bottom 25% of values. Values across the bottom 25% of the combined capital city markets were up 3.1% in the March quarter, around three times faster than the rate of growth in the top 25% of values (0.7%). This is fairly unusual for an upswing, because during periods of home value increases, the higher end of the market usually has higher growth rates,” Ms Owen explained.

The skewed demand towards the low end of the market can be attributed to rapidly rising interest rates, which have squeezed borrowing capacity by an estimated 30% since the start of rate rises. Other factors, such as strong migration and labor market conditions in Western Australia, where properties are generally cheaper, are also at play.

Other highlights from the April Housing Chart Pack include:

• The combined value of residential real estate is estimated at $10.3 trillion at the end of March.
• National home values rose 1.6% in the March quarter, the largest quarterly increase since November (1.9%).
• Regional dwelling values continue to outpace growth across the capitals for the third consecutive month.
• Perth leads capital growth performance in the greater capital city markets.
• National sales activity continues to trend higher, with an estimated 48,793 sales in March.
• The median time on market rose slightly to 36 days in Q1, while vendor discounting rates compressed to -3.6%.
• Auction activity trended higher through March, peaking in the week before Easter, but clearance rates trended lower.
• Australian rent values continued to trend higher in March, up 1.0% over the month and 8.6% over the year.
• Dwelling approvals slid lower in February, driven by a decline in the unit segment.
• The value of new housing finance commitments rose 1.5% in February, led by a 4.8% increase in first-home buyer lending.