Dissecting 10 years of Core Logic data – capital cities & regional areas (Ep.52)

In this episode, the Property Planner, Buyer and Professor discuss data provided by CoreLogic’s Tim Lawless on Australia’s capital cities and regional areas over the last ten years. Which cities took out the gold, silver and bronze?

In this episode David Johnston, Cate Bakos and Peter Koulizos take you through: 

  1. Data provided from Core Logic for the last decade of capital growth data for all the capital cities and hand out the gold, silver and bronze 
  2. How regional areas faired compared with their capital city counterparts and why rental yield in regional areas is likely to outperform the capital city.  
  3. The performance of units compared with houses, which are gaining in popularity in some cities. But beware of the data! Metrics surrounding units can very easily lead you astray.  
  4. The importance of risk management and mortgage strategies to save yourself stress and hold on to assets when the market inevitably starts to dip.  
  5. How your next investment purchase could be anywhere in Australia, depending on your price point, risk profile and stage of life. 
  6. Why values are likely to double every 15 years, not every 7-10. 
  7. And of course, our “gold nuggets”! 

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Show notes

  • Today we look at Australia’s top performing cities, handing out the gold, silver and bronze for the last 10 years.  
  • We look at the data provided by Core Logic’s Tim Lawless, particularly focusing on capital growth in houses predominantly. Figures for houses are more reliable than units, because the figures are not swayed as much by the prevalence of new dwellings.  
  • The results are in! We outline the compounding growth in each capital and the return if you had invested $1M in property.  
    • Sydney – 5.5% – $708,000 
    • Melbourne – 4.9% – $613,000 
    • Hobart – 3.1% – $397,000 
    • ACT – 2.8% – $318,000 
    • Adelaide – 1.5% – $160,000 
    • Brisbane 1.3% – $137,000 
    • Perth – negative 1.4% – $131,000 
    • Darwin – negative 1.9% – $174,000 
  • Regional areas: 
    • NSW – 2.8% 
    • VIC – 3.1% 
    • Tas – 2.3% 
    • SA – 0.5% 
    • QLD – 0.2% 
    • WA – negative 3.6% 
    • NT – 0.7% –  
  • Capital city v regional – only in NT did regional areas do better in capital growth than the city. Darwin was one of the cities hit the hardest with retraction of infrastructure, from mining and resources. People may have gotten over-excited about Darwin. It was a hot spot fueled by one employer or one segment of the industry, which suffers when the industry suffers. On top of that, Darwin has a smaller population to underpin the demand, so the fluctuations both up and down make a greater impact. 
  • Rental return – most likely you would have seen the opposite result, with rental returns in regional areas outstripping their capital cities. 
  • Your property strategy – what this highlights is the location you purchase in must fit the strategy which is right for you – taking into consideration your price point and risk profile, what stage of life you are in. The right location for your investment purchase could be anywhere in Australia.  
  • The numbers don’t lie – even a 1% difference in capital growth can be $100,000’s or $millions of difference to your retirement.  
  • Holding property when the market dips – Perth was an outperformer in the preceding 10 years – but underperformed in the last 10. The market is quite cyclical. All markets will go through periods of growth and downturn, which is why you need strategies in place to hold property as you accumulate more.  
  • When you’re waiting for value to go up, 5 years feels like a long time, 2 years feel like a long time. If you’re in a challenging financial position, then a week can feel like a long time. Risk management strategies will help you travel through these downturns which are inevitable without having to have the stress that reduces your quality of life or makes you make short term decisions to sell assets that you otherwise could have kept 
  • Units – On average, units underperformed houses by 1%. However, in Adelaide, units actually outperformed houses. This is because Adelaide went through a period of urban renewal, with new apartments being built. New dwellings sell at a premium, which reflects an artificial increase in price.  
  • The worst performing asset class were units in WA going backwards 7.4% compounding for 10 years. Of your hypothetical $1million, the asset would be worth less than half. This is probably due to bad mining towns which busted after mining wound down. 
  • Sydney unit value growth beat all other capital city house growth (bar Melbourne) – why is that? What we do see is that units tend to be more acceptable in Sydney, due to a number of factors. Sydney has the largest population, although Melbourne is catching up and the geography of the city of the city itself, plus public transport. This amounts to a large amount of the population wanting to live near the city, where units are more affordable than houses. These factors all feed into price point and lifestyle choices.  
  • Core logic, we hope you’re listening! A very useful dataset would be to see metrics around new property sales and then subsequent sale price for the first sale post initial purchase.  New property purchases are really a different segment of their own and there is lack of reliability of unit data. A detached house is a detached house, but a unit could be an apartment, a townhouse, a villa unit – all sorts of things. You can also look at the data for units and incorrectly assume that the area is growing in value, but value increase is actually due to a prevalence of new units selling at premiums.  
  • Property values doubling – not likely to happen in less than 15 years. Previously it was believed that house prices double every 7 to 10 years. What we saw from the 50’s onwards is that single income homes became double income homes with more women entering the workforce – a double income increased affordability. Double income households are more prevalent now, but we don’t have a third person at home to add to the workforce, so it’s unlikely that value growth will happen that fast. 

David Johnston – The Property Planner’s Golden nugget: there is an ocean of data out there and unless you are an amazing swimmer, it pays to talk to the experts who can help you distil that data, because without it, you can be sent off in a lot of different directions by the strong current and occasionally dumped by the surf.  

Cate Bakos – The Property Buyer’s Golden nugget: if you’re thinking you wish you bought in Sydney, you don’t buy Sydney, you buy a particular property in a particular location, in a particular street, in a particular suburb which happens to be in a capital city. You need to do your research, top down research is great, state, city, suburb, street, style of property, because it is more than just about picking the city.

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