According to the RP Data-Rismark June Hedonic Home Value Index Results, capital city dwelling values have shown a 1.4 per cent capital gain over the month of June 2014.

RP Data research director Tim Lawless notes that the strong result has partially reversed last month’s 1.9 per cent fall and provides a -0.2 per cent decline in dwelling values over the June quarter. All cities, barring Adelaide and Darwin recorded a rise in dwelling values.

Top performers for capital gains over the 2013-2014 financial year include Sydney and Melbourne where dwelling values are up 15.4 per cent and 9.4 per cent respectively across each city. The quieter Brisbane housing market is now gathering some pace with dwelling values moving 7.0 per cent higher over the past twelve months. Dwelling values have been cool in Hobart (2.5 per cent), Canberra (2.9 per cent) and Adelaide (2.9 per cent) in the previous financial year.

Over the current growth cycle, capital city dwelling values are up 15.5 per cent, with Sydney recording the most significant capital gain at 23.1 per cent growth since the end of May 2012. Adelaide’s housing market recorded the least significant capital gain over the cycle to date, with dwelling values rising by 5.6 per cent.

RP Data’s Tim Lawless explains the recent volatility in the month-to-month Index could be a seasonal factor, with the recent reduction in capital gains, likely a correction from the strong market conditions reported over the first quarter of the year.

Sydney once again topped the list from a total returns perspective; the capital gain combined with the gross rental yield over the year has provided Sydney homeowners with a total return of 20.2 per cent over the financial year. Melbourne, Darwin and Brisbane have also recorded a total gross return in excess of 12 per cent over the year.

In the rental market segment, gross rental returns are currently recorded at 3.9 per cent for capital city houses and 4.6 per cent for capital city units. The yield environment is lowest across Melbourne where gross yields are averaging just 3.4 per cent for a typical house and 4.3 per cent for units. Darwin continues to show the highest gross rental yields at 6.1 per cent for houses and 5.9 per cent for units.

With interest rates remaining low for the foreseeable future, it is doubtful that housing values will start to slide; however, natural affordability constraints will start to dent buyer demand, as will the low rental yield scenarios that are very much evident across the largest capital cities of Melbourne and Sydney.

Clearance rates are holding relatively firm, further reinforcing the notion that the housing market isn’t set to show a market correction.