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Investors flock as values rise

Investors are starting to once again buzz round the proverbial honeypot as interest rates drop, values rise and returns improve, according to a monthly report.

RP Data and Rismark International this week released their July housing market results which show that capital city dwelling values increased by 1.6 per cent over the month of July after posting a solid 1.9 per cent capital gain in June.

These latest figures take the cumulative recovery to 6.5 per cent since dwelling values found their trough at the end of May last year.

The July results also take the rolling quarterly lift in capital city dwelling values to 2.3 per cent over the three months ending July and values are 4.9 per cent higher over the past twelve months.

According to RP Data research director Tim Lawless, however, the market remains somewhat of a mixed bag.

"The housing market is being buoyed by very positive conditions in Sydney, Perth and to a lesser extent Melbourne, with residential values in these cities now 3.7 per cent, 4.4 per cent and 2.4 per cent respectively higher over the past three months alone”, Mr Lawless said.

“At the other end of the scale you have cities like Adelaide, Brisbane and more recently Darwin where conditions are more sedate with dwelling values slipping lower over the past quarter.

"By including rental yields in our assessment of the housing market, some clarity is provided as to why investors are becoming so active."

Mr Lawless noted that the RP Data-Rismark Accumulation Index, which factors in both capital gains and gross rental yields, is up 9.4 per cent over the past year.

He added that one immediate effect of the easing in monetary policy this week will be that people start to shift their portfolios again towards physical assets such as property.

According to Rismark CEO Ben Skilbeck, an increase in investor activity is highlighted when examining lending commitments data.

"While overall outstanding credit to housing only grew 4.4 per cent over the year to May 2013, the dollar value of lending commitments to investors in the month was 24 per cent higher than in May 2012”, Mr Skilbeck said.

“For owner-occupiers, the May 2013 lending commitments year-on-year increase was 11 per cent."

The most significant total gross returns were recorded in Perth with the accumulation index up 13.3 per cent over the year. Sydney trailed slightly with a total gross return of 11.2 per cent over the past year. Total returns are now the lowest in Hobart at just 4.9 per cent over the past year.

Time to sell has also continued to strengthen over the month, the report shows.

According to Mr Lawless, a typical capital city dwelling is selling in just 45 days compared with 59 days at the same time a year ago. Vendors are discounting their prices less and clearance rates remain close to 80 per cent in Sydney and slightly lower in Melbourne.