Advertisement
Australia markets closed
  • ALL ORDS

    8,153.70
    +80.10 (+0.99%)
     
  • AUD/USD

    0.6491
    -0.0045 (-0.69%)
     
  • ASX 200

    7,896.90
    +77.30 (+0.99%)
     
  • OIL

    81.94
    +0.59 (+0.73%)
     
  • GOLD

    2,218.80
    +6.10 (+0.28%)
     
  • Bitcoin AUD

    108,761.18
    +857.05 (+0.79%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     

Aussie home value growth swelled in these two areas

Combined capital city home values in Australia have increased substantially since the financial crisis back, although numbers are largely driven by two key cities, as growth remains muted in the remainder of the country.

As the financial crisis hit, Australia’s combined capital city housing markets experienced a rapid 6.1% decline in home values between March and December 2008, according to a recent CoreLogic report.

Due to aggressive interest rate cuts by the Reserve Bank (RBA) and the introduction of the boost to the First Home Owners Grant, further home value declines were averted. 

Also read: Apartment over-building doesn't mean prices will fall

ADVERTISEMENT

In fact, home values began to rise across two cycles; from December 2008 and in June 2016, 7.5 years later, combined capital city home values are now 54.9% higher.

Over the past 7.5 years, the majority of Australia’s capital cities as recorded growth which is at, or below the rate of inflation.

Meanwhile, Sydney and Melbourne have enjoyed noticeable growth at a whopping 87.9% and 71.8% respectively.

Between May 2012 and June 2016, combined capital city home values increased 37.3% while official interest rates fell by 200 basis points to 1.75%. 

Although home values have increased over the period, Sydney and Melbourne have again recorded a substantially higher rate of value growth than all other capital cities. 

CoreLogic data indicates that since the financial crisis the capital city housing market could be described as being extremely interest rate sensitive. 

Digging deeper into the data shows that in reality it is only Sydney and Melbourne that have really responded to the stimulus of low interest rates. 

The relative strength of the Sydney and Melbourne economies and the much greater employment growth has clearly assisted drive housing values higher in these cities.

Also read: Top five star Aussie growth suburbs

Until the economic performance improves outside of Sydney and Melbourne it seems unlikely that sustainable growth will return in these areas despite the extremely low interest rates which are set to potentially move even lower over the coming months, the report said.

For Sydney and Melbourne although affordability is increasingly becoming stretched home owners have experienced a substantial increase in equity. 

With historically weak rental markets and record low yields it will be interesting to see if investors and upgraders in the two largest capital cities continue to show a thirst for housing in these cities given the growth phase has now been running for more than four years.