(Australian Associated Press)
Aussies will swing back into the renovation game over coming years as wages growth starts to pick up and the jobs market improves, an economist says.
Home values in most capital cities, particularly in Melbourne and Sydney, are well up on what they were 12 months ago.
The average home across the five major capital cities is worth 10.6 per cent more now than it was a year ago, according to property analytics firm CoreLogic.
Healthy house price growth usually encourages home owners to splash out on renovations but this hasn’t been the case recently as Australians manage high household debt and sluggish wages growth.
Commonwealth Bank of Australia economist Kristina Clifton says home owners are spending around one third of their dwelling investment on renovations, which is about 10 per cent lower than the long-term historical average.
“We have had some very strong house price growth in recent years and we haven’t really seen much of a pick-up in renovation activity,” she said.
“Some households are carrying pretty high levels of debt at the moment and wages growth is low, so that could be a factor that’s constraining it as well.”
Ms Clifton said wages growth would likely slowly start to improve and the jobs market had been picking up over the past few months.
“That is going to help and as people see their house price going up, they tend to feel more confident in spending a bit more on their house,” she said.
“If you know your house price is going up by 10 per cent a year you kind of don’t mind going out and spending $15,000 on a new bathroom.”
The average Melbourne home is worth 15.8 per cent more than it was a year ago, while Sydney homes have increased their value by an average of 12.7 per cent, according to CoreLogic figures.
But Perth homes are worth an average of 1.7 per cent less than 12 months ago.
For the week to August 13, home values across the major capital cities all rose – apart from Perth, which fell 0.4 per cent.
Adelaide recorded the highest rate of growth at 0.6 per cent, followed by Sydney (0.5 per cent), Brisbane (0.2 per cent) and Melbourne (0.1 per cent).
On the auction front, volumes climbed to the highest level in six weeks, with 2,011 homes going under the hammer compared with 1,857 the previous week.
The preliminary auction clearance rate also rose, to 70.5 per cent from 68.2 per cent a week earlier, but CoreLogic said it expected the final rate to be lower.
CAPITAL CITY PRIVATE TREATY MEDIAN PRICES
Sydney – $880,000
Melbourne – $665,000
Canberra – $620,000
Brisbane – $525,000
Darwin – $520,000
Perth – $490,000
Adelaide – $429,750
Hobart – $360,000
Combined capitals – $649,239
Sydney – $699,000
Melbourne – $529,500
Canberra – $401,000
Perth – $390,000
Brisbane – $374,000
Darwin – $371,000
Adelaide – $311,000
Hobart – $276,400
Combined capitals – $561,972
Source: CoreLogic Property Market Indicator Summary week ending August 13, 2017.