Consumer Price Index (CPI) data for the December 2018 quarter was recently released by the Australian Bureau of Statistics (ABS).    The data showed that over the quarter, CPI increased by 0.5% to be 1.8% higher over the past year.  The Reserve Bank has a target range for underlying inflation of 2% to 3% over the business cycle and inflation is currently below the target range.  When housing data is adjusted for the effects of inflation, it provides valuable insight, especially in the context of nominal dwelling values now falling across the country.  Note that in the following analysis all data is adjusted for national CPI, not CPI across the individual cities.


Nominal dwelling values have fallen over the past year in Sydney, Melbourne Perth and Darwin however, when ‘real’ changes are calculated taking into consideration the impact of inflation, Hobart and Canberra were the only two capital cities in which values increased over the 2018 calendar year.  Furthermore, the already large -8.9% nominal fall in dwelling values in Sydney turns into a double-digit decline (-10.5%) over the year.  


Over the five years to the end of 2018, dwelling values have increased by 11.5% nationally and by a slightly higher 12.9% across the combined capital cities.  Across the individual capital cities, dwelling values have increase in all cities except for Perth and Darwin where real dwelling value declines have been greater than 20% in just five years.  In Brisbane and Adelaide there has been very little growth while Hobart has seen the largest increase in real values.


Taking a slightly longer look at how the market has performed shows that the results are quite similar over the past decade.  While Perth and Darwin have still seen large declines, values are also lower over the 10 years in Brisbane and only marginally higher in Adelaide.  Furthermore, the real change in dwelling values over the past decade in Sydney and Melbourne has been substantially stronger than it has been elsewhere.


Taking inflation into account, Hobart is the only capital city in which real dwelling values remain above their previous peak.  In Hobart, dwelling values currently sit 8.3% above their previous peak in December 2007.  All other capital cities have recorded a decline in values from their peak.  The following highlights when the market peaked in each capital city and the current decline from that peak:

  • Sydney - June 2017 peak, 13.8% decline
  • Melbourne - December 2017 peak, 8.7% decline
  • Brisbane – March 2008 peak, 14.4% decline
  • Adelaide – June 2010 peak, 5.6% decline
  • Perth – December 2006, 32.6% decline
  • Darwin – March 2013 peak, 3.7% decline
  • Canberra – June 2010 peak, -3.7% decline

Although inflation remains below the RBA’s target range, values are expected to continue to fall throughout 2019.  As a result, real dwelling values are likely to move further away from their previous peaks, even in those cities where values have already experienced a substantial correction.