Although Sydney and Melbourne home values are recording strong levels of capital growth currently, the rate of growth is much slower than that recorded between the ‘boom’ period of 2001 and 2004.
When considering the current surge in Sydney and Melbourne home values, it is worthwhile revisiting how strong conditions were during the housing boom of 2001 through to 2004. 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.
At the beginning of 2001 the rate of growth in home values began to accelerate. The pick-up in value growth began in Sydney and Melbourne and then flowed through to the other capital cities. A major difference between the post-2000 growth phase and the current growth phase is that the post-2000 phase was not preceded by falls in home values. Another major difference is of course that the growth post-2000 was broad-based whereas the current growth in home values has been narrow, largely focussed on Sydney and Melbourne. Finally household debt levels were substantially lower in 2001 than they are now, which is likely another major contributor to the stronger increase in home values then compared to now.
The previous growth phase is widely accepted to have commenced at the end of 2000 however, the commencement of the current rises in values has varied across each city.
Home values began rising from May-12 and have increased by 38.8%, over the same period post-2000 they had risen by 60.2%.
Sydney value growth 2001-04 vs. current growth
Home values began rising from May-12 and have increased by 23.6% compared to 58.0% over the same period post-2000.
Melbourne value growth 2001-04 vs. current growth
Home values reached a low point in May-12 and have since increased by 10.9%, in comparison home values had increased by 91.5% over the same timeframe post-2000.
Brisbane value growth 2001-04 vs. current growth
Home values reached a recent low point in Mar-12 and have since increased 7.0%, in the post-2000 growth phase values had increased by 74.6% over the same timeframe.
Adelaide value growth 2001-04 vs. current growth
Home values started rising from Oct-11 and have risen by 14.5% to Apr-14, over the same timeframe post-2000 home values had increased by 55.4%.
Perth value growth 2001-04 vs. current growth
Home values reached a low point in Nov-13 and have increased by 8.9% compared to a 16.7% increase over the same timeframe after 2000.
Hobart value growth 2001-04 vs. current growth
Home values hit a low point in Jan-12 and have since risen by 17.3%, over the same timeframe post-2000 home values in the city rose 22.1%.
Darwin value growth 2001-04 vs. current growth
Home values have been rising since the end of Jan-12 and have increased by 8.5% compared to 96.3% over the same timeframe post-2000.
Canberra value growth 2001-04 vs. current growth
The data shows that Sydney and Melbourne are the stand-out cities for capital growth currently. More importantly, the rate of capital growth over recent years across each capital city is significantly lower than over the same timeframe from 2001 onwards. In fact, Hobart and Darwin are the only capital cities in which the post-2000 level of capital growth is even close to the current level of capital growth.
Article by Cameron Kusher, CoreLogic RP Data senior research analyst.
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