Last year finished with a sharp increase in house prices in capital cities around Australia. Although the growth in prices had been modest for November, December saw an 1.4% rise in residential property prices on average. Melbourne and Hobart led the gain, although prices Melbourne and Sydney surged the most throughout the year.
In 2016, the cost of houses in capital cities rose 10.9%, which represents the fastest growth in real estate prices since 2009. Since the Global Financial Crisis, house prices have increased by almost 98% in Sydney and nearly 84% in Melbourne.
The cost of buying a house increased at a much higher rate than the cost of purchasing an apartment, which led to weaker rental yields for houses. The cost of a house in Melbourne rose 15.1%, whereas the price of apartments only rose 1.7%. In Sydney, housing prices rose 16.7% against a 9.6% increase in apartment prices.
The Housing Affordability Report compiled by CoreLogic shows that the cost of residential property in Sydney is 8.3 times higher than annual household incomes. Due to this disparity, the Report estimates that households spend almost 45% of their income on paying the mortgage. This figure illustrates the elitism that the Australian housing market currently entertains, with residential property prices surging while wages remain steady. However, the rise in house prices has also allowed the construction industry to fill the gap left by the mining sector and has contributed to consumer confidence.
The Australian housing boom, which was expected to slow in 2016, has surged through the year to have house prices at an unexpected high. Property forecasts are now showing that the upward trend of property prices in capital cities could continue throughout the new year.