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Apartment values slip against houses

AAP logoAAP 30/11/2016 Garry Shilson-Josling, Economist

The growing supply of apartments is starting to weigh on the housing market, even though prices overall are still rising.

Capital city housing prices rose 0.2 per cent on November, with annual growth averaging 9.3 per cent but property market analytics firm Corelogic says increased supply of apartments is starting to have an impact.

"It appears that higher unit supply is progressively weighing down the capital gains across Melbourne's unit sector, with annual capital gains tracking at 3.9 per cent for Melbourne units compared with a 12.2 per cent annual gain in Melbourne house values," CoreLogic head of research Tim Lawless said.

"A similar trend can be seen in Brisbane, where the supply of units across key inner city regions is also high. Brisbane house values were up 4.3 per cent over the past 12 months compared with a 0.9 per cent fall in unit values."

With the supply of units in the pipeline remaining large, market conditions are likely to remain weak in the markets where high supply levels are reducing the prospects for price rises, Mr Lawless said.

The combination of the ongoing upward creep in prices and slower growth in rents pushed rental yields - gross annual rents as a percentage of property values - to a new record low in November.

"The average gross rental yield across combined capital city dwellings is now recorded at 3.2 per cent, down from 3.5 per cent a year ago and 4.1 per cent five years ago," Mr Lawless said.

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