The ABS released its Residential Property Price Indexes for the final quarter of 2014.
Let’s take a look at what we can learn in four short parts.
Part 1 – Sydney and Brisbane now lead
As expected Sydney leads the way with dwelling price growth accelerating in Q4, adding another +3.4 percent to finish the calendar year up by +12.2 percent.
Brisbane also finished 2014 with a solid result of +5.3 percent having added +1.4 percent growth in Q4.
Price growth in Melbourne has at last demonstrably slowed, finishing 2014 with +4.5 percent capital growth.
Given record low borrowing rates, dwelling price growth was relatively benign in 2014 in Adelaide (+2.5 percent), Hobart (+2.2 percent), Canberra (+1.7 percent), Perth (+1.2 percent) and Darwin (+0.8 percent).
Sydney’s robust growth in Q4 2014 was driven by both established houses (+3.4 percent) and attached dwellings (+3.3 percent).
However, capital growth across all attached dwellings was notably soft in 2014, a stark reminder that purchasing generic apartments tends to lead to sub-optimal returns if the asset does not retain a key element of scarcity.
Although attached dwellings showed burly growth in 2014 in Sydney (+10.9 percent) and Brisbane (+5.5 percent), growth in attached dwelling indexes was weak in Melbourne (+1.8 percent) and has been negligible almost everywhere else.
Part 2 – Long run indexes
Since Q4 2008 prices have barely tracked inflation in Adelaide (+14 percent) and Hobart (+13 percent), with Brisbane (+18 percent) now at last picking up after a protracted lull.
In line with our forecasts and expectations Sydney’s market has remained head and shoulders above the rest recording +58 percent growth over the past six years.
The Melbourne market (+39 percent) now finally appears to be slowing – somewhat later than perhaps expected – while Darwin (+35 percent) looks set to go into reverse gear after a bonanza run.
Across the full data series since Q3 2003 the strongest performer of the major cities was Perth by a huge margin as house prices surged through the mining investment boom.
The chart also shows that Sydney has to some extent been “playing catch up”, underscoring the forever cyclical nature of real estate markets.
Part 3 – Value of owned dwelling stock
An instructive chart below shows that for all the talk of overheating dwelling prices, the value of dwelling stock owned by households has only really increased sharply in New South Wales, and to a lesser extent Victoria over the last three years.
Very little of note has taken place in the smaller states.
Similarly the mean dwelling value has accelerated sharply in New South Wales.
Part 4 – Total number of dwellings
Finally, what of the residential construction boom? In the event the total number of residential dwellings increased by +38,000 in the quarter to 9,448,300.
Yet again construction-happy Victoria led the way with +10,700 new dwellings thereby totalling +43,700 over the past year, while Queensland added a sturdy +9,100 new dwellings in the Q4 to add +32,200 over the past 12 months.
By contrast New South Wales added only +7,300 new dwellings in Q4.
In fact, since the ABS commenced this data sub-series in September 2011, New South Wales has added a total of only +96,400 new dwellings, a period of time through which the state population has boomed by around ~325,000 heads.
This continuing high ratio of population count to new dwellings of ~3.25 in recent years (particularly high given that so much of the new stock is apartment dwellings which tend to house fewer heads per household) helps to explain why Sydney rents have continued to rise, despite construction picking up from an awfully low base.