The ABS just released its residential property price indices for the June quarter.
The total value of residential dwellings in Australia rose to around $5.25 trillion at the end of June quarter 2014, rising $112,598.5 million over the quarter to be 8.8 percent higher than a year ago.
Price growth over 2014 has been in line with our forecasts, with Sydney leading the way as expected, and more moderate growth elsewhere.
Sydney property prices increased by 3.1 percent over the June quarter, with Brisbane and Melbourne also recording reasonably strong results at 1.8 percent and 1.3 percent respectively.
Sydney prices have increased by 5.7 percent in H1, which leads us to expect that our forecast of 6-9 percent growth in 2014 will be close to the money.
Price growth in the June quarter was relatively easy in Adelaide, Canberra, Darwin and Hobart, while Perth prices declined by 0.2 percent in the June quarter.
Over the year to June Sydney prices have increased strongly by 15.6 percent, with Melbourne next in line at 9.3 percent and then Brisbane at 6.8 percent.
The long term residential price data shows that outside of mining intensive cities such as Perth and Darwin, property price growth has not been all that remarkable since the beginning of the ABS data series in September 2003.
On a weighted average basis, property prices have tracked at around a 5 percent per annum pace over the last eleven years.
Our experiences in London have led us to the viewpoint that sourcing capital growth after the financial crisis would be best approached in the major capital cities, for the many reasons discussed here previously.
The great household debt binge which caused prices to rise everywhere in response to lower interest rates ended circa 2006.
Since the financial crisis of 2008, price growth has been strongest in Sydney (+48.8 percent) and Melbourne (+36.3 percent).
However, since 2008 price growth has been much weaker in Adelaide (+13.9 percent) and Hobart (+11.1 percent), essentially tracking inflation.
In the future we see dwelling price growth as being far more closely tied to income growth over time as household debt levels have topped out, and therefore we recommend focusing on the cities which can see real sustainable wages growth such as Sydney, and not remote regional or resources-dependent locations.
The ABS data series may be discontinued due to budget cuts which seems to be a short-sighted idea given its independence.