New figures paint less optimistic picture of housing market

by Julia Corderoy10 Feb 2015
Inflation adjusted home values paint a very different picture of Australia’s property market, with combined capital city home values up by just 6.1% over 2014.

The January CoreLogic RP Data Home Value Index results reveal that combined capital city home values increased by 7.9% over the 2014 calendar year, but after taking the annual inflation rate of 1.7% into account, the growth rate is much more modest.

According to CoreLogic RP Data head of research Tim Lawless, nominal home value growth has been strong in Sydney and Melbourne and moderate across all other cities, while only Canberra saw values fall over the year. However, when adjusted for inflation, real home value growth isn’t so optimistic.

“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,” Lawless said.

“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% in 2014.”

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. 

Over the six years to December 2014, Sydney and Melbourne recorded real home value increases of 34.4% and 26.9% respectively, while each of the remaining capital cities recorded real home value increases of less than 10%. 

The results show that real home values have actually fallen over the past six years in Brisbane (-6.5%), Adelaide (-3.5%) and Hobart (-14.6%).

Lawless says this highlights the importance of considering inflation with home values.

“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.”

He also says it is worth noting just how long ago the previous inflation adjusted peaks were in Brisbane (March 2008), Perth (September 2007) and Hobart (December 2007).