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Dwelling values surge but Adelaide stutters

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Written by Brendan Simpkins

Australia has just seen its highest annual growth rate since May 2010, according to a report recently released by CoreLogic.

Dwelling values across all capital cities moved 1.4% higher over the month of March, taking the combined capital city index growth rate up to 12.9% – the highest in 7 years.

Sydney continues to lead the rest of the country with an 18.9% year on year growth rate, its fastest pace in nearly 15 years.

Three other capital cities saw growth rates over 10% – including Melbourne (15.9), Canberra (12.8) and Hobart (10.2).

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Adelaide, though, was well off the pace with a year on year growth rate of 3.4% for the lowest in the country.

This is still a sustainable trend as the growth rate has made an increase, but remains lower than the other 4 cities.

Brisbane also had a small increase of 3.7%, while Darwin and Perth both declined.

Adelaide’s dwelling value increased by .4% for the month, and had risen 1.6% at the end of the quarter.

Adelaide has the second lowest median house prices in the country at $439,000.

CoreLogic’s head of research, Tim Lawless, said it was unclear whether such strong growth trends can continue.

“Given the recent policy announcements from the Australian Prudential Regulation Authority (APRA) are aimed at dampening investment related credit demand, we can expect lending conditions for investment purposes will tighten, particularly for investors with small deposits or those applying for an interest only loan,” he said.

“Additionally, higher mortgage rates handed down by Australia’s major banks may contribute towards cooling some of the exuberance being seen in the largest capital city housing markets.

“Furthermore, organic constraints in the market are becoming more pronounced. As examples, record-low rental yields, which imply dwelling values are out of balance with rents, and heightened affordability constraints are preventing some prospective buyers from participating in the market.”

“Record-high levels of apartment supply are also likely to act as a brake on capital gains in those precincts where supply levels are high.”