City house prices continue to rise but CoreLogic tips slowdown this year

Hobart is posting stronger house price gains but Sydney is again the standout ahead of an expected slowdown.

Dwelling values in almost all capital cities rose in January, with the largest monthly gains posted in Hobart, Sydney and Melbourne, according to figures from CoreLogic.

Sydney dwelling values were a standout, up 1 per cent in the month and 2.7 per cent over the three months to the end of January, having now soared 70.5 per cent since June 2012, the research showed.

In aggregate, capital city dwelling values increased 0.7 per cent in January, with every capital city except Darwin posting gains.

Over the three months to January, all capital cities increased. Hobart reported the highest quarterly gain at 5.8 per cent, with CoreLogic attributing the strong market conditions to better affordability and improving economic conditions.

On an annual basis, the combined capital city growth rate was 10.7 per cent, but was again strongest in Sydney with a 16 per cent increase.

CoreLogic head of research Tim Lawless expects the rate of growth to moderate this year as the affordability issue heats up.

“Affordability constraints are likely to become more pressing, particularly in Sydney, where the dwelling price to income ratio was approaching 8.5 times in September 2016,” Mr Lawless said.

“The deposit hurdle is becoming a larger barrier to entry with additional costs such as stamp duty adding to the high entry costs for housing.”

He also suggested a slight lift in mortgage rates could dampen investment demand, while increased supervision from APRA could continue to tighten credit.

The research follows a warning yesterday from the Housing Industry Association that affordability is at its worst level in four years.