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Investors have missed the opportunity to take advantage of capital growth in Sydney, Melbourne and Perth, according to RP Data analysis.
Senior research analyst Cameron Kusher said gross rental yields are now falling in these markets following strong value growth in 2013.
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“The value appreciation from an already high base is also likely to lead to affordability constraints for buyers over the coming year,” said Mr Kusher.
Also constraining these markets is a slowdown in mining investment in Perth and pressure on the manufacturing sector in Melbourne from the high Australian dollar.
Mr Kusher highlighted both Brisbane and Adelaide as markets to watch in 2014.
“The Brisbane housing market has recorded value growth of just 3.1 per cent throughout 2013 and may be best placed to capitalise on the looming affordability constraints and easing investment demand in Sydney, Melbourne and Perth,” he said.
“Adelaide potentially offers a similar opportunity; however, population growth is much weaker and the unemployment rate and economic fundamentals appear somewhat weaker in South Australia than in Queensland.”
While Mr Kusher predicted the low interest rate environment will drive further growth in home values nationally, it will be at a slower pace than the growth recorded in 2013.
From January 1 to the end of November 2013, Australia’s combined capital city home values increased by 8.3 per cent, according to RP Data.
The rate of growth in 2014 will depend on how the labour market performs, according to Mr Kusher.
“The biggest wild-card for the housing market is likely to be what happens with the labour force,” he said.
“If people start to become nervous about their job security it is likely to result in a lower level of demand for housing and, in turn, impact on capital growt.”
