The CoreLogic RP Data Home Value Index results for September 2015 were released last week which showed another strong headline growth figure.
However, digging below the surface reveals that Sydney and Melbourne are still the only capital cities to be recording exceptionally high rates of capital gain.
The CoreLogic RP Data Home Value Index is weighted based on the number of dwellings located within each capital city.
As a result, larger housing markets such as Sydney and Melbourne have a much greater influence on the Index results than smaller ones like Darwin or Canberra.
Over the past year, the CoreLogic RP Data Home Value Index has recorded an 11.0% rise across the combined capitals index, however, dig a little deeper and you see that the vast majority of growth in dwelling values is emanating from Sydney and Melbourne.
It is also important to realise that these two cities represent around 40% of the entire country’s housing stock, so outside of these markets home value growth is very different.
Rolling annual change in combined capital city home values
Looking at the individual capital city housing market performances you can see a disparity in the rate of value growth between Sydney and Melbourne and all other capital cities.
While Sydney home values have increased by 16.7% and Melbourne’s by 14.2% over the past year, four capital cities have actually recorded value falls.
Furthermore, Brisbane recorded the third highest rate of capital growth however, it is a comparatively minor 4.6% increase in value relative to Sydney and Melbourne.
Annual change in individual capital city home values, 12 months to September 2015
This is not a new phenomenon, ever since the financial crisis in 2008, Sydney and Melbourne have recorded substantially higher rates of home value growth than the rest of the country.
During 2008, home values across the combined capital cities fell by -6.1% between March and December of that year.
From December 2008 they began to rise and despite some falls in 2011 through to 2012, have generally trended higher ever since.
Over the period from December 2008 to September 2015, combined capital city home values have increased by 48.8%.
Only Sydney (76.5%) and Melbourne property markets (68.8%) have recorded total growth in excess of the combined capital cities figure.
In fact, the city with the third highest rate of growth over this period has been Darwin where values are 22.7% higher.
The total rate of growth for Darwin is more than three times less than the total rate of growth for Melbourne.
Total change in capital city home values from December 2008 to September 2015
Based on the data presented, the next time you read about unsustainable growth in values or the word ‘bubble’ it is important to realise this is largely due to exceptional recent value growth in Sydney and Melbourne.
In fact, most capital cities have seen home values consistently falling in real terms since 2008.