Sydney values still tracking upwards

Growing-house-prices-mean-that-rental-yields-are-pushed-lower-_157_6005720_0_14072606_300Good rental yields can be an attractive prospect for property investors, but house values can also provide some long-term benefits. As house prices continue to sprout, it could be a case of balancing compressed yields with capital growth opportunities.

Research from the CoreLogic RP Data Home Value Index for February reveals that values across Australia’s capital cities increased 0.3 per cent in February, with Sydney holding its position as the star performer. Values bloomed 13.7 per cent over the year to February, matched only by Victoria’s 7.4 per cent growth, but Head of Research Tim Lawless noted that there was slight moderation in the most recent results.

“The slower rate of capital gain in February may come as a surprise to some who were expecting lower mortgage rates to instantly propel the pace of home value growth higher,” he said in a March 2 statement.

Strong house price growth generally results in slightly lower rental yields, as investors try to claw back some interest on their purchase. This is much the case now, with the capital cities seeing yields fall to 3.7 per cent. As the epicentre of property growth in Australia, gross returns in Sydney still rose a promising 18.2 per cent over the 12 months to February – but values are growing at a much faster rate than rents can keep up with.

In fact, according to RP Data, since June 2012, values in Sydney have expanded an incredible 34.8 per cent. Mr Lawless pointed out that while the low interest rate environment is having an impact, it is not the single driver – instead, other factors, like job creation and retail spending, are influencing the housing market.

“We might not see the lower interest rate environment stimulate the housing market as much as it has in the past,” he said.

Capital gains might require a long term frame of mind, so it is important to get advice from your property manager about maximising your property’s profits for the time being.

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