House price peaks and troughs - only minimal growth outside of Sydney and Melbourne after inflation: Tim Lawless

House price peaks and troughs - only minimal growth outside of Sydney and Melbourne after inflation: Tim Lawless
Tim LawlessFebruary 8, 2015

The January CoreLogic RP Data Home Value Index results show that combined capital city home values have increased by 7.9% over the 2014 calendar year. 

Taking the rate of inflation into account over the same period, the rate of value growth has been more moderate at just 6.1% due to annual inflation of 1.7%.

Nominal home value growth has been strong in Sydney and Melbourne and moderate across all other cities while Canberra saw values fall over the year.  

When you adjust for inflation, the weak growth outside of Sydney and Melbourne is more prominent with values falling over the year in Darwin and Perth.

In real terms, Sydney was the only city to see home values increase in double digits over the year, rising by 10.6%.  In Melbourne, real home values rose by 5.8% over the year and along with Sydney, was the only city to record real home value growth of more than 3.0% in 2014.  

Across the combined capital cities, home values reached a quarterly peak in September 2010 and fell by as much as -11.9%. 

As at December 2014, combined capital city home values were still -1.3% lower than their previous peak. 

Sydney is the only city where home values are higher than their previous peak; up 10.4% from the previous peak which occurred all the way back in the first quarter of 2014.  Home values in Melbourne are nearing a new record high while in all other capital cities home values remain well below previous peaks.  

It’s worth noting just how long ago the previous inflation adjusted peaks were in Brisbane (March 2008), Perth (September 2007) and Hobart (December 2007).

An ongoing trend in the capital city housing market has been the higher levels of growth in Sydney and Melbourne compared to the other cities.  After home values reached a peak in early 2008 they fell by more than -6% to the end of 2008 during the height of the financial crisis.  After that time home values once again started to rise however, the rate of growth has been much greater in Sydney and Melbourne than in any of the other capital cities.

Sydney and Melbourne have recorded real home value increases of 34.4% and 26.9% respectively over the six years to December 2014.  Each of the remaining capital cities has recorded cumulative real home value increases of less than 10%. 

The results show that real home values have fallen over the past six years in each of Brisbane (-6.5%), Adelaide (-3.5%) and Hobart (-14.6%).  The growth in home values over this period has been very narrow-based focussed mainly on Sydney and Melbourne which have continued to be the strongest markets in 2014.

Although overall combined capital city home value growth has been strong over the past few years it has been heavily influenced by Sydney and Melbourne.  The reality is that outside of the two largest cities there has been very little real home value growth for more than six years. 

Tim Lawless

Tim Lawless is national research director of CoreLogic RP Data.

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