The current property boom is not as robust as the boom times of 2001-2004.
With interest rates at all-time low levels, many may be thinking that this current boom cycle is the most robust they’ve ever seen.
Not so, according to research out today in the CoreLogic RP Data weekly Property Pulse.
While the current research shows that Sydney and Melbourne home values are recording strong capital growth, this current growth rate is much slower than that recorded between the ‘boom’ period of 2001 and 2004.
Another big surprise to come from today’s research is that Hobart and Darwin were the only two capital cities where the post-2000 level of capital growth even comes close to current capital city growth levels.
To put the current property surge into perspective, particularly for Sydney and Melbourne, it is worthwhile revisiting just how strong conditions were during the housing boom of 2001 through to 2004.
Although the rate of capital growth in Sydney, and to a lesser degree Melbourne, is strong, it is nowhere near as strong as the rapid home value growth recorded between 2001 and 2004.
At the beginning of 2001, the rate of growth in home values began to accelerate, firstly in Sydney and Melbourne.
It then flowed through to the other capital cities. A major difference between the post-2000 growth phase and the current growth phase is that the post-2000 phase was not preceded by falls in home values.
Another major difference is that post-2000 growth was broad-based whereas the current growth in home values has been narrow, largely focused on Sydney and Melbourne.
At the same time, household debt levels were substantially lower in 2001 than they are now, which is another key contributing factor for strong increases in home values then, compared to now.
Property Growth Phase Snapshop – city x city:
Sydney – home values began rising from May-12 and have increased by 38.8%, over the same period post-2000 they had risen by 60.2%. Melbourne – home values began rising from May-12 and have increased by 23.6% compared to 58.0% over the same period post-2000.
Brisbane – home values reached a low point in May-12 and have since increased by 10.9%, in comparison home values had increased by 91.5% over the same timeframe post-2000.
Adelaide – home values reached a recent low point in Mar-12 and have since increased 7.0%, in the post-2000 growth phase values had increased by 74.6% over the same timeframe.
Perth – home values started rising from Oct-11 and have risen by 14.5% to Apr-14, over the same timeframe post-2000 home values had increased by 55.4%.
Hobart – home values reached a low point in Nov-13 and have increased by 8.9% compared to a 16.7% increase over the same timeframe after 2000.
Darwin – home values hit a low point in Jan-12 and have since risen by 17.3%, over the same timeframe post-2000 home values in the city rose 22.1%.
Canberra – Home values have been rising since the end of Jan-12 and have increased by 8.5% compared to 96.3% over the same timeframe post-2000.
The previous growth phase is widely accepted to have commenced at the end of 2000 however, the commencement of the current rises in values has varied across each city.
More importantly, the rate of capital growth over recent years across each capital city is significantly lower than over the same timeframe from 2001 onwards.
In fact, Hobart and Darwin are the only capital cities in which the post-2000 level of capital growth is even close to the current level of capital growth.