Capital city property prices rose 0.5% in the month of June, with Sydney, Melbourne and Hobart recording substantial gains, while five capital cities recorded falls, according to the CoreLogic Home Value Index.

Higher prices in Sydney and Melbourne pushed the CoreLogic Hedonic Home Value Index to a record high at the end of June. Dwelling values across all capital cities rose 8.3% in the year to June.

Sydney values were up 1.2% in the month of June, to be up 11.3% for the year. Melbourne's values rose 0.8% for the month, to be 11.5% higher over the year. And Hobart's prices rose 1.8% for the month, making a gain of 6.2% for the year.

Though CoreLogic reported weaker property price growth in the final quarter of 2015, it has recorded gains since then. However, the pace of gains has weakened, according to Tim Lawless, CoreLogic Asia Pacific research director.

“The pace of capital gains in June was substantially lower than the April and May results when CoreLogic reported a 1.7%, and 1.6% month-on-month lift in capital city dwelling values,” he said.

“The monthly growth rate reduction is likely to be very much welcomed by state and federal government policy makers and regulators who may be concerned about a sustained rebound in capital gains.”

“Home values in Sydney have been rising for four years, and have increased by a cumulative 59% over this time frame. Melbourne dwelling values have been rising for the same length of time and have moved 41% higher over the growth cycle to date,” pointed out Lawless.

While the headline results are positive, five of Australia’s eight capital cities recorded a fall in property prices in June.

Monthly declines of more than 1% were recorded in Darwin (-1.6%), Adelaide (-1.3%) and Canberra (-1.1%), while the falls in Brisbane (-0.1%) and Perth (-0.8%) were less severe.

Lawless attributed Hobart’s gains to improved economic conditions and higher immigration, both coming from low bases.

“Economic conditions and migration rates are gradually improving from a low base," he said. "The strength in the Hobart market comes after a long period of underperformance, where home values in the city increased by only 1.4% per annum over the past ten years."

Lawless said Hobart could continue to benefit because it offers both affordability and lifestyle advantages. “Potentially, the Hobart housing market is being fuelled by the sheer affordability of housing and a renewed trend towards Melbourne and Sydney buyers unlocking their equity to make lifestyle housing purchases,” he said.

For the first six months of 2016, the strongest capital gains have been observed in Sydney (8.9%), Hobart (8.5%) and Melbourne (5.8%).

With capital city dwelling values moving higher, at least at a macro level, there has been some further slippage in gross rental yields.

Average gross rental yield across the combined capital cities are their lowest since the CoreLogic rental series commenced in 1996. The typical gross yield on a house is now averaging 3.2% and units are averaging 4.1%. 

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