A review of Australia’s property market over the past 20 years by CoreLogic research analyst Cameron Kusher shows that while the housing market has experienced weaker conditions over the past year, it is a different story over the longer term, with most cities seeing substantial gains. Top performer Melbourne recorded the greatest value gains, almost tripling in value since the start of this century.
Using values-based data from the January 2019 CoreLogic Home Value Index, dwelling values recorded some substantial falls over the 12 months to January 2019, with half of the eight capital cities recording dwelling value falls while four of the seven rest-of-state markets experienced declines.
Nationally, dwelling values fell by 5.6 per cent over the 12 months to January 2019 — the largest annual fall since March 2009. Combined capital city dwelling values were 6.9 per cent lower over the past year — the largest fall since February 2009 — while combined regional markets saw much more moderate value falls of 0.8 per cent, which is the largest since October 2012.
Over the past 20 years, national dwelling values increased by 197.4 per cent, with the combined capital cities recording stronger total value growth (212.4 per cent) than the combined regional markets (150.3 per cent).
For the individual capital cities, Melbourne recorded the greatest value gains over the period (274.6 per cent) while Darwin value growth has been the most moderate (38.4 per cent). Darwin’s weak growth was driven by values falling by almost 26 per cent since peaking in mid-2014.
Across the individual rest-of-state regions, growth has been strongest in regional NSW (185.6 per cent) and weakest in regional WA (77.5 per cent). Darwin and regional WA were the only two major regions of the country where values have not doubled over the past 20 years.
Five years to Jan 2004: best value growth this century
The five years to January 2004 was the strongest five-year period for value growth within the past 20 years, with national dwelling values increasing by 80.2 per cent. Over the period, the total growth in values across the combined capital cities (79.6 per cent) and the combined regional markets (82 per cent) was remarkably similar.
In fact, it was also the only five-year period in which value growth was stronger in regional markets than in capital cities.
Over the five years to January 2004, capital city value growth was greatest within Canberra (110.9 per cent) and weakest within Darwin (-3.9 per cent). While values in Darwin fell, the next-weakest growth in capital city values was Perth (63.5 per cent). Across the regional markets, values saw little growth over the five years in regional WA (24.4 per cent) and regional NT (28.9 per cent) while elsewhere value growth was quite strong, with values doubling in regional NSW (108.8 per cent).
–> 2009: regional WA booms
Following the strong value growth between 1999 and 2004, the growth in dwelling values over the five years to January 2009 was generally much more circumspect. Over the period, national dwelling values increased by 14.9 per cent, with a 15.2 per cent rise across the combined capital city markets and a 14.2 per cent increase throughout the combined regional markets.
While the headline figures show little growth, it was quite a different story within different regions, with some of the smaller housing markets experiencing big gains.
Across the individual capital cities, Perth (52.3 per cent) and Hobart (57.1 per cent) recorded the strongest value growth over the five years to January 2009. Sydney was the weakest capital city market for value growth over the five years, with values falling by 4.6 per cent.
In regional markets, regional WA was booming on the back of the mining boom, with values increasing by 80.9 per cent over the five years. Although regional NSW recorded the strongest value growth over the previous five years, it was the weakest market during this period, with values falling 3.4 per cent.
–> 2014: return to capital city growth
The five years to January 2014 marked the period following the GFC and saw the end of the mining boom. Due to low interest rates and market stimulus, values rose 20.3 per cent nationally during the five years. The growth in values over the period was almost entirely driven by the combined capital cities (25.3 per cent), with very little value growth across he combined regional markets (4.8 per cent).
Across the capital cities, values growth in Sydney (36.5 per cent) and Melbourne (32.3 per cent) was much stronger than elsewhere, with Brisbane (5 per cent) experiencing the weakest growth. In regional markets, values declined by 2 per cent over the five years in regional Queensland while regional NT (30.2 per cent) experienced the greatest increase in values over the period.
–> 2019: mixed results amid credit access pressures
Over the most recent five years, national dwelling values have increased by 19.4 per cent. The combined capital cities index has increased by 20.6 per cent while the combined regional market index is 14.9 per cent higher.
Across the individual capital cities, Perth (-15.6 per cent) and Darwin (-24.4 per cent) have recorded large falls while Hobart (35.1 per cent) has experienced the strongest value growth. In the regional markets, values have fallen in regional SA (-1.1 per cent), regional WA (-22.6 per cent) and regional NT (-7.3 per cent) while regional NSW has recorded the largest value increase (28.2 per cent).
While past performance is certainly not an indicator of future performance, the data shows that over the past two decades most regions have seen some substantial increases in dwelling values. The data also shows that over five-year increments, the best regions for growth in a given five-year period are typically the weaker areas for growth over the following five years.
The housing market is seeing several headwinds that have not been seen for some time. Throughout most of the past 20 years, credit has been becoming easier to access, but since late 2014 credit has increasingly become harder to access.
Furthermore, ongoing strong value growth in Sydney, Melbourne, and Hobart has seen housing affordability rapidly deteriorate over recent years. Finally, economic conditions outside of NSW and Victoria have tended to be quite weak over recent years, which has curtailed housing demand in these markets.