The increase was slightly lower than the record 10.1% posted in the past financial year.
Sydney was once again the priciest of all state capital cities, with a median home value of $772,000. The most affordable city is Hobart, with a median home price of $315,000.
Capital growth rates in the housing market reached 5.1% in the second half of the financial year as the housing market picked up speed after interest rates were slashed in February and May.
The official cash rate from the Reserve Bank is sitting at an all-time low of 2%.
RBA Policy Spurs Market Rise
Low interest rates played a major role in the market growth, particularly in Sydney and Melbourne, according to CoreLogic RP Data Head of Research Tim Lawless.
He says, “Growth conditions had been moderating from April last year through to the end of January 2015.”
“With the RBA cutting the cash rate in February, there was an instant buyer reaction across the Sydney and Melbourne housing markets where auction clearance rates surged back to levels not seen since 2009, capital gains once again accelerated and we are now seeing Sydney and Melbourne homes selling in record time; Sydney homes are selling in just 26 days and Melbourne homes are selling in 32 days.”
Melbourne and Sydney posted higher than average growth in housing prices during the financial year, showing increases of 16.2% and 10.2% respectively.
It was a subdued market for the rest of the cities, with Adelaide ranked next to Sydney with housing values rising 4.5%. Dwelling prices in Brisbane grew 3.4%, while Hobart posted a growth of 0.9%.
Home prices in Perth and Darwin declined -0.9% and -2.9% respectively compared with the last financial years.
According to Lawless, “The three tiers of housing market performance can be best explained by economic and demographic factors where it’s no coincidence that New South Wales and Victoria are recording the strongest economic conditions coupled with the strongest rates of migration which is fuelling housing demand.
“These states are more sheltered from the mining sector downturn and have benefited from the strong multiplier effect of housing construction as well as a vibrant financial services sector.
“The Perth and Darwin markets are weakening in line with the downturn in the resources sector and an associated weakening in infrastructure investment and a marked slowdown in migration.
“Brisbane, Adelaide, Canberra and Hobart are seeing softer economic conditions and population growth compared with Sydney and Melbourne, however housing markets have shown some level of growth over the year.”
There’s some good news for Darwin though; the northern capital had the best performing rental yields for houses at 5.8%. Brisbane units outdid the rest of Australia with rental yields rising 5.4% for the financial year.
Melbourne ranked last in rental yields in both houses and units, with gross yields of 3.2% and 4.3% respectively.
$1 million the new normal
The release of the financial year growth statistics comes as a new survey shows a quarter of Australians considers $1 million is a median price for a city dwelling.
Most of the respondents (63.9%) think $1 million is too high to pay for a dwelling, but a significant 25.9% think that number is fair. 5% of respondents believe $1 million is a relative bargain for their current address.
According the survey of 2000 people by law firm Slater and Gordon, those that are more likely to believe that $1 million is an average price for a home are those respondents living in a higher median home value.
People who most likely believe $1 million an average price for a property are NSW residents, followed by residents in Victoria, Western Australia and Queensland.
A warning to home buyers from Slater and Gordon Conveyancing Works Lawyer Robert Kern: be cautious of your limits because home values continue to increase.
He says, “If you’re considering purchasing a million dollar property be prepared that banks might ask for guarantees or mortgage insurance, which could add to the repayments.”
“While $1 million may increasingly be considered average, it doesn’t necessarily follow that people can afford to pay that or are paying that.”
According to industry experts, mortgage rates are expected to remain low and the market to continue to be bullish, especially on the east coast.
Melbourne and Sydney will continue to see growth but it will likely slow down during the year, says CoreLogic RP Data research analyst Cameron Kusher.
He says, “We are already seeing signs of growth in other markets around the country particularly areas like Newcastle and Wollongong adjacent to Sydney as well as certain pockets in Brisbane and the Gold and Sunshine Coasts.”
“We would expect the dramatic differential in affordability in these areas relative to Sydney and Melbourne will drive more buyers to these areas.”
Kusher states that the downturn in the markets of Perth and Darwin will probably continue with the slowdown of the resources market.