Property market has not been as stellar as we may think

Transcript:

Kevin:  Vibrant property market conditions over the last seven years of this decade could easily have many of us believing that we’re again in boom times. However, research by CoreLogic confirms that with the exception of Sydney, capital gains performance was substantially lower than for the last decade. Sydney is the only city that’s actually recorded higher levels of value growth this decade compared to the last.

I know that’s rather confusing, let me try and unpack all of that. To help me do that, Kevin Brogan joins me from CoreLogic.

It can actually be very confusing when we talk like that, but let’s firstly focus on what happened in the years 2000 to 2007, if you can, Kevin, and we’ll have a look at what happened between 2010 and 2017.

Kevin B:  Our head of research, Cameron Kusher, has done a comparison of the levels of growth both on a combined capital city basis and on individual capital cities, taking two base dates, the first being from the year 2000 and the second from the year 2010. So we’re comparing the growth over the first seven years of each of those decades.

As you pointed out, Sydney is one that deserves particular note, because in fact, it is the only capital city where we’ve actually seen a growth in excess this decade of what it experienced last decade. Between 2000 and 2007, the increase that they had was 61.1%; over 2010 to 2017, we had 78.3%.

Kevin:  Let me just stop you there, because as you pointed out, that is the only capital city that’s shown growth in those two seven-year periods. All the others have actually declined. Just before we go on with the other capital cities, interesting to note in that period of 2000 to 2007 that Sydney actually recorded the lowest growth of all of the capital cities. Some of them, Perth up around 199%, Hobart 198%, even Darwin at 97%. It’s interesting when you look at the dynamics of what happened over that seven-year period.

Kevin B:  It certainly is, and with Sydney, there’s actually a link perhaps to your next guest, and that is of course the period from 2000 to 2004 was directly in the wake of the Sydney Olympic Games. So within Sydney, between 2000 and 2007, the bulk of that increase was immediately after the Olympic Games. Once it reached 2004, things suddenly started to taper off, so the bulk of that growth was in a very concentrated period and the beginning of the period.

Kevin:  Interesting, because that, in fact, was the time when Sydney grew less than any other capital city in Australia.

Kevin B:  Yes. These figures have actually thrown out some really interesting talking points, I think. If you compare the performance of Sydney perhaps to some of the other capital cities, if we take Perth as the example that you mentioned, almost 200% growth between 2000 and 2007, that is possibly the most significant difference in performance, because from 2010 to 2017, we’ve seen a 3.3% retraction. That’s probably the most stark contrast.

Kevin:  Absolutely, yes. Darwin was the only other capital city that recorded regressing figures – came back by 5%, I believe, between 2010 and 2017.

Kevin B:  Yes, that’s absolutely right, as against a performance in the previous decade from 2000 to 2007 of 97.3%.

Kevin:  Let’s quickly run through what happened 2000 to 2007. Sydney, you have already told us the growth was 61%. Take me through the other capital cities, if we could.

Kevin B:  In Brisbane between 2000 and 2007, you had a 147.2% growth. At the moment, 2010 to 2017 is 6.6% growth, so it is a much more modest growth. It’s not dissimilar to where I am in Adelaide, where we had growth of 124.4% compared to about 11% for the current decade.

Hobart is an interesting case. That was 198% in the previous decade. We’re looking at 3.4% now. But the other overlay we need to put in there is Hobart is a sort of up-and-coming capital; you’re actually seeing some really decent growth right now.

Kevin:  That is a capital city that’s been predicted by a number of people as having exceptional growth potential. There are even some who are now saying that growth is almost at an end. That’s not great growth, 3.4% over the period of 2010–2017.

Kevin B:  No, that’s right. The most recent trend is for greater growth, but you’re quite right about the fact that if you’re going to sustain growth, you’re actually going to need an economic base from which to grow, so the concern for Hobart might be injections of population, migration, and job opportunities, employment opportunities, because they need to underpin any sustained growth.

Kevin:  Canberra was interesting to me, 133% growth between 2000–2007, and between 2010–2017, we’ve already seen 24% growth. That really surprised me, because that’s a much more stable market than I would have thought, Kevin.

Kevin B:  It is. Canberra has been performing very well recently, and that’s on similar grounds to Hobart, and that is you’re actually getting decent capital growth but you’re also getting good rental returns.

I think we’ve spoken before about the fact that if you have runaway capital growth, sometimes the rent returns fall behind in terms of the percentage yield. Canberra is one of those areas where we’ve seen a fair bit of growth, particularly in houses.

One of the other reports we sent out this week was about pain and gain. You’re still seeing people selling units for perhaps less than they paid for in Canberra, but the housing side of things is actually pushing ahead quite strongly.

Kevin:  Kevin Brogan from CoreLogic, thanks for your time, mate.

Kevin B:  Thank you very much, Kevin.