Property prices skyrocket

Sydney and Melbourne home values jump

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Property prices in our two largest capital cities, Sydney and Melbourne are skyrocketing on the back of record low interest rates.

According to the latest RPData-Rismark Home Value Index out today, capital city home values have increased taking the combined capitals index to a record high, beating the previous record set in October 2010.

Since the beginning of June 2012, capital city dwelling values have increased by 8.7% through to the end of September 2013. For the month of September, residential property values in Sydney and Melbourne were up by more than 2% over the previous month.

RPData research director Tim Lawless says we haven't seen market conditions this strong since April 2009 for Sydney and May 2010 for Melbourne. While the two largest housing markets are pushing higher, most other capital cities saw subdued conditions, with home values falling in Brisbane, Perth, Hobart, Darwin and Canberra.

With the RBA's official cash rate at a record low of 2.5%, and mortgage rates available for around 5%, the strong housing market conditions are driving growth in new housing construction – good news for our building industry – and a sector of the economy that the Reserve Bank has been trying to stimulate. Mr Lawless says we have already seen a trend towards more dwelling approvals and higher credit demand for newly constructed homes.

Building materials companies like Boral (ASX: BLD), Adelaide Brighton (ASX: ABC), CSR (ASX: CSR) and Brickworks (ASX: BKW) should start to see improving conditions, including more work and higher revenues.

However, talks of a property bubble are premature according to RPData-Rismark. 10 year compound growth is only 2.5%, and it was common for some cities to experience growth spurts. Annualising the short-term quarterly spurts can be misleading, according to Rismark CEO, Ben Skilbeck.

Foolish takeaway

The RBA is likely to closely scrutinise the data, before the board meeting today, but it appears unlikely that the central bank will change the official cash rate today.

Not into property but looking to pick up a dividend-paying stock? Discover The Motley Fool's favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of "The Motley Fool's Top Dividend Stock for 2013-2014."

More reading

Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »