Low interest rates, rising house prices and a crackdown on investor lending may look like a housing boom, but new research shows that this current growth cycle is much slower than that recorded between the ‘boom’ period of 2001 and 2004.
Whilst the spot light has been on the Sydney and Melbourne housing markets in particular, which have climbed 14.5% and 6.9% respectively over the past year, data compiled by CoreLogic RP Data, which compares the current cycle with the post-2000 cycle paints a different picture.
“…although the rate of capital growth in Sydney, and to a lesser degree Melbourne, is strong, it is nowhere near as strong as the rapid home value growth recorded between 2001 and 2004,” CoreLogic RP Data research analyst, Cameron Kusher said.
In the current cycle, home values began rising from May 2012 and have increased by 38.8% in Sydney and 23.6% in Melbourne. In comparison, over the same period post-2000 they had risen by 60.2% in Sydney and 58% in Melbourne.
According to Kusher, other major differences between the post-2000 growth phase and the current growth phase are that the current phase has been largely contained in Sydney and Melbourne and the post-2000 phase was not preceded by falls in home values.
“Another major difference is that post-2000 growth was broad-based whereas the current growth in home values has been narrow, largely focussed on Sydney and Melbourne,” he said.
“At the same time, household debt levels were substantially lower in 2001 than they are now, which is another key contributing factor for strong increases in home values then, compared to now.”
In fact, the research reveals that Hobart and Darwin were the only two capital cities where the post-2000 level of capital growth even comes close to current capital city growth levels.
Home values in Hobart reached a low point in November 2013 and have increased by 8.9%, compared to a 16.7% increase over the same time frame after 2000. Home values in Darwin hit a low point in January 2012 and have since risen by 17.3%, compared to 22.1% post-2000.