Little value growth outside of Sydney And Melbourne over past decade: Cameron Kusher

Little value growth outside of Sydney And Melbourne over past decade: Cameron Kusher
Cameron KusherDecember 7, 2020

Value growth over the past decade has been characterised by substantial value rises in Sydney and Melbourne while elsewhere capital gains have been materially lower, in fact negative in some regions.

Over the past decade the Australia housing market has been impacted by the Global Financial Crisis (GFC), periods of rising and falling mortgage rates, heightened levels of investment and growing demand for housing from offshore buyers. Additionally, the national economy has transitioned away from a boom in the commodity cycle and major resources related infrastructure projects towards the services sector and housing construction. The market has also seen significant variation in the rates of value growth with Sydney and Melbourne leading the way.  

The first chart shows the cumulative change in dwelling values over the 10 years to January 2018.  Over the period, values across the nation increased by 41.8% however, it is important to note this was heavily influenced by the two largest housing markets, Sydney and Melbourne.  In fact, while nationally dwelling values have increased by 41.8% over the past decade, only Sydney (79.3%), Melbourne (72.4%) and regional Victoria (42.7%) have recorded value growth in excess of that figure.

Little value growth outside of Sydney And Melbourne over past decade: Cameron Kusher

Three regions of Australia have seen dwelling values which are currently lower than they were a decade ago.  These regions are Perth (-6.9%), Regional Qld (-5.1%) and regional WA (-29.5%).  Although all other regions have recorded value increases over the past decade, there has been growth of less than 10% over the decade in Darwin (5.4%) and regional SA (4.0%).

In early 2008 the GFC hit and dwelling values began to slide.  Although the periods of decline varied across regions, generally values started to fall early in 2008 with value growth returning in early 2009.   The declines were fairly short and sharp.  The declining housing market was reversed due to two main factors: a swift reduction in mortgage rates and the introduction of government stimulus including additional first home buyer incentives which helped stimulate growth in demand and subsequently values.

Little value growth outside of Sydney And Melbourne over past decade: Cameron Kusher

During the GFC downturn, all regions of the country recorded declines with national values falling by -7.9% between February 2008 and January 2009.  Western Australia was particularly hard hit by the downturn with values falling by double-digits in Perth (-11.0%) and Regional WA (-12.2%) while all other regions avoided double-digit value falls.  Value declines during the GFC downturn were relatively minor in Darwin (-1.5%), Regional SA (-2.4%) and Regional NT (-2.2%).

Following the stimulus-led re-inflation of dwelling values post-GFC, as the stimulus was removed from the market values once again started to fall.

First home buyer incentives were removed and the Reserve Bank started to lift interest rates from their generational lows.  Between 2010 and 2012, although timing does vary somewhat across the regions, the national housing market once again experienced value declines.

Little value growth outside of Sydney And Melbourne over past decade: Cameron Kusher

Between June 2010 and February 2012, national dwelling values fell by -6.5% with capital cities experiencing slightly larger falls than regional markets.

In this downturn, Qld was hardest hit with Brisbane (-10.6%) and regional Qld (-11.1%) the only regions to record double-digit value falls.  By comparison, Sydney (-3.7%), regional Vic (-3.6%) and regional SA (-3.0%) recorded relatively minor value declines throughout the period.

More recently, softer housing market conditions have become evident with a number of regions starting to see values decline.  The final chart highlights the change between current dwelling values and the historic housing market peak.  

Little value growth outside of Sydney And Melbourne over past decade: Cameron Kusher

Nationally, dwelling values are -0.7% off their peak with the combined capital cities (-1.0%) the main driver of the weakness.  In fact, Brisbane and Hobart are the only capital cities in which values at the end of January 2018 were not lower than their previous peak.  Perth (-10.9%), Darwin (-21.7%) and regional WA (-29.5%) currently have dwelling values which are more than 10% below their previous peaks.

The data presented within highlights that despite most regions of the country having seen dwelling values increase over the past decade, within that decade there have been periods in which values have fallen.  The data presented also highlights how during the value growth periods, growth has very much been slanted towards the Sydney and Melbourne markets.

With dwelling values now falling in a number of regions, it will be interesting to see how rapidly values, fall, what may or may not be done to slow the falls and how the market declines will compare to other periods of decline over the past decade.

Cameron Kusher

Cameron Kusher is senior research analyst at CoreLogic RP Data.

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