City prices continue to grow

Posted on 1/04/2016  
City prices continue to grow

House prices continue to grow in most of our major cities, although you wouldn’t know it based on the typical coverage in newspapers around the country.

The latest data (dated 31 March 2016) from CoreLogic suggests house prices generally have risen in the past 12 months in Melbourne (up 10.7%), Sydney (up 7.5%), Adelaide (up 3.3%), Hobart (up 4.0%), Brisbane (up 4.9%) and Canberra (up 1.7%).

Perth (down 2.0%) and Darwin (down 1.5%) remain the two cities without growth markets.

The generalised average situation across the eight capital cities is an annual rise of 6.6%.

Media has seen the figures differently. One News Corp headline claims that “property price growth has ground to a halt”. The Australian says house price growth is “the slowest in three years”.

Journalists arrive at these conclusions by generalizing about “Australian property prices” and by focusing on short time frames. Monthly changes in price indexes are always erratic and ultimately meaningless - but journalists place great emphasis on them because it makes it easy to create negatively sensational headlines.

But the CoreLogic data is still largely positive, even when examined over shorter time frames.

In the March Quarter there were rises in the house price indexes for Sydney (up 2.3%), Melbourne (2.5%), Adelaide (up 2.2%), Darwin (up 3.6%), Canberra (1.7%) and, leading the nation, Hobart (up 6.5% in three months). Brisbane is unchanged and Perth (down 1.0%) is the only city in the negative.

Media has placed most of their emphasis on the month-to-month changes in March, because this provides the most scope for negativity. Sydney, Adelaide, Perth and Darwin all recorded rises in March, but Melbourne, Hobart, Canberra and Brisbane all recorded month-to-month decreases.

Hotspotting has charted the month-to-month changes over the past year and this reveals that monthly changes are usually statistical aberrations, with a small decrease one month cancelled out by a small rise the next month.

Monthly changes should be ignored, with the focus placed on the long-term trends.

For example, Hobart dropped 1.1% in March, but was up 6.5% in the March Quarter and was up 4.8% over 12 months. Darwin is down 1.5% over the past year, but it rose 2.6% in the month of March (the highest in the nation) and was up 3.6% over the March Quarter.

You can turn these figures into a boom or a bust, depending on your focus and your mindset.

So what do the figures really tell us, in terms of meaningful, realistic trends? Our assessment includes the following:- 

  • The rate price growth in Sydney continues to slow down, not surprisingly as it is abundantly clear that Sydney’s boom is well and truly past its peak.
  • Melbourne leads capital city Australia on price growth, but its rate of price growth has probably peaked and will show lower rates of growth in the near future.
  • Moderate growth is happening in some of the smaller capital cities, notably Hobart, Brisbane, Adelaide and Hobart. The Tasmanian capital appears to be gathering speed, rising off a low base as its economy recovers.
  • Perth and Darwin, no longer boosted by a resources boom, continue to have struggling markets, although the rate of price decline is quite small.



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