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Only four capital cities have recorded real growth in home values

With the Australian Bureau of Statistics releasing the Consumer Price Index for the December 2016 quarter recently, using the CoreLogic Home Value Index we can adjust changes in dwelling values for the effects of inflation. 

The value of looking at inflation-adjusted or ‘real’ home value changes is that it highlights whether housing values are moving higher or lower relative to other costs across the economy.

Real vs nominal annual change in capital city home values, Dec-16

Combined capital city dwelling values increased by 10.9% throughout 2016 while headline inflation increased by a much lower 1.5%.

When adjusted for inflation, value growth is lower across all cities (as you’d expect) with values having fallen over the year in both Perth and Darwin.

Real vs nominal change in home values - Dec-08 to Dec-16

In 2008 home values fell by 6.1% between the end of the March and December quarters. 

In real terms, capital city dwelling values fell by a larger -8.3% over the same period.  

investor-enquiry-form

Both in nominal and real terms values started to rise once again from the end of 2008.

This recovery in growth was fueled by generous grants to first home buyers and the stimulus of extremely low interest rates. 

Over the eight years from December 2008 to December 2016 only Sydney and Melbourne have recorded real dwelling value growth in excess of 12%.

Outside of Sydney and Melbourne, Darwin (2.6%) and Canberra (11.7%) are the only two cities that have recorded a real increase in values.

In Brisbane (-2.3%), Adelaide (-2.6%), Perth (-9.0%) and Hobart (-8.6%) real home values are lower than they were eight years ago.

Real home values changes since previous market peaks to December 2016

The chart above shows the real change in individual capital city home values from their previous market peak.

The chart shows that in only Sydney and Melbourne are real values above their previous peak.

In Sydney, values are 37.8% higher than their March 2004 previous peak.  market rise property

Real Melbourne home values are 19.4% higher than their September 2010 peak.

In Brisbane, real home values peaked over the March 2008 quarter and at the end of 2016 they were still 9.1% lower than they were at that time.

Adelaide home values were 5.3% lower in December 2016 than they were at the time of their real value peak in June 2010.

Perth home values peaked in real terms all the way back in September 2007 and at the end of 2016 they were still -18.5% lower in real terms.

Real dwelling values peaked in December 2007 in Hobart and at the end of 2016 were still -14.3% lower.

Following their peak over the September 2010 quarter, Darwin dwelling values are currently -19.8% lower in real terms.

Finally in Canberra, real dwelling values are -1.4% lower than their June 2010 peak.

Although most people tend to not look at the world in inflation-adjusted terms, it is important to consider housing costs from this aspect from time-to-time. map australia

It highlights that although the cost of housing at times escalates quickly (particularly so in Sydney and Melbourne at the moment) in real terms the growth may not be substantial.

It is undeniable that Sydney home values have risen rapidly over recent years however, consider that since their previous March 2004 peak, they have only increased at a rate of 2.5%pa.

This is largely due to the fact that values fell in real terms between March 2004 and March 2014.

With inflation remaining low and values continue to rise we would anticipate that in real terms values are likely to continue to rise across most of the capital cities throughout 2017.



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About

Cameron Kusher is Corelogic RP Data’s senior research analyst. Cameron has a thorough understanding of the fundamentals such as demographics, trends & economics. Visit www.corelogic.com.au


'Only four capital cities have recorded real growth in home values' have 4 comments

  1. Avatar for Property Update

    February 9, 2017 @ 5:53 pm Sandra

    So Perth is the next place to buy then, since values are low at the moment…? For those of us with less money to invest, which regionals do you like, please?

    Reply

    • Avatar for Property Update

      February 9, 2017 @ 6:46 pm Michael Yardney

      I don’t think your assumption is correct – Perth is still a no go zone with prices likely to fall further through 2017

      Sorry Sandra, but I also avoid the regional markets sinec 80% of the population growth and economic growth occurs in the capital cities

      Reply

  2. Avatar for Property Update

    February 10, 2017 @ 10:43 am jeff

    Interesting that Sydney and Melbourne are also the two cities targeted by investors from mainland China. Many of these “investors” are less interested in investment returns than the ability to get cash out of their country before their rules change. The same phenomena occurred in 1997 in Hong Kong leading to a real estate boom and subsequent bust in that city and took over a decade to recover.

    Reply


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