Did the calendar really just click over to May?  Seems so.  The last month of Autumn is here and the cooler weather has well and truly hit.

Has this cooler change been reflected in the markets during April?

Capital city property markets started 2014 quite strong with a first quarter growth rate of 3.5%, largely thanks to the large March monthly increase of 2.3%.  Exceptionally strong growth in Sydney has skewed the national results.

Between May 2012 (when the housing market bottomed) and 30 April 2014; combined capital city dwelling values have cumulatively risen by 16.1%.  Further, values are 7.5% above their prior peak; again largely driven by Sydney’s solid performance.

In the three months to April, Sydney’s median house price has exceeded the $800,000 mark for the first time on record; achieving $802,000!  This may represent the higher proportion of prestige homes, which have outperformed during the recovery phase of Sydney’s property markets.  Sydney’s median house prices are currently 30% higher than Melbourne and a huge 68% higher than Brisbane…

Markets appear to be cooling with April capital cities recording a capital slowdown in monthly values of only 0.3%, bringing the 2014 year to date growth rate of approx. 3.9%.  This reflects the impact of housing affordability, particularly in the Sydney and Melbourne markets.  The markets are seemingly returning to sustainable growth levels.  First home buyers may finally some relief in sight.

The challenge for investors is finding good rental yields in cities where capital growth is rising at a much faster pace than rental returns.  Capital cities rents have only risen by 2.3%, while dwelling values risen by 11.5% over the same 12mth period.

Sydney gross rental yields are approx. 3.7%, slightly better than Melbourne’s 3.3%.  With these cities prices out of sync with rental returns, it is hardly surprising that investors are seeking alternative capital cities, such as Brisbane to gain both capital growth and better rental yields.

Across the nation, capital cities are seeing positive demand for new properties with new listings 18.8% higher than the past 12mths, whilst the total number of properties available for sale decreasing 3.8%.  Properties are selling in a shorter time period, on average 19 days less than 12mths ago.  Vendor discounting has also decreased from 6.2% 12mths ago to an average of 5.6% as at 31/03/14.

It will be very interesting to see how the markets adjust over the next quarter and where investors believe the best market returns will be achieved.