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Double trouble for property market – except Melbourne

Melbourne has proven to be the standout performer on the residential property market stage over the past decade as the only capital city where prices have actually doubled.

But data released on Thursday by CoreLogic RP Data shows that the average increase in home values across Australia’s capital cities over the last 10 years is around half the level of growth recorded in the decade between 1996 and 2006.

Average capital city home prices increased by a total of 72 per cent over the 10 years to January 2016.

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But in an asset class that is generally expected to at least double every decade, many property owners may be feeling short-changed. That could certainly be the case for homeowners in Hobart, with prices in the Tasmanian capital having grown by only 17.1 per cent in 10 years.

By contrast, the median house price in Melbourne rose 100.9 per cent, with Sydney the next best at 78 per cent.

“Although combined capital city home values haven’t doubled over the past decade, the previous decade was quite a different story,” said CoreLogic RP Data research analyst Cameron Kusher.

“Between January 1996 and January 2006 combined capital city home values increased by 151.7 per cent, with house values up 159.6 per cent and unit values 110.1 per cent higher. Based on this data, the most recent decade of capital city home value growth has been half that of the previous decade.”

Mr Kusher said value growth over the past decade across individual capital cities showed a diversity in results.

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“In fact, many cities are a long way from having doubled with values in Brisbane, Adelaide, Perth, Hobart and Canberra having all increased by less than 50 per cent over the past decade. Home values in Sydney and Darwin have each recorded increases of more than 75 per cent over the past decade, however they too fell well short of seeing values double over the decade.”

Looking at value growth over the five years to January 2016, Mr Kusher said: “It looks unlikely that by the time January 2021 rolls around that home values would have doubled over the decade in any of the capital cities. Over the past five years, Sydney and Melbourne are the only capital cities in which home values have increased by more than 10 per cent with values lower in Hobart and Darwin.”

“While there was a time when home values doubled over a 10-year period the data suggests that the days of such rapid value rises are behind us. It’s important to remember that in recent times we have had record low mortgage rates yet that has failed to spark any substantial home value growth outside of Sydney and Melbourne.

“With little wage growth and ongoing economic uncertainty it is clear that in most areas of the country there are limits to what people can pay for housing. Subsequently there has been little impetus for any significant value growth outside of the two largest capital cities. Even in Sydney and Melbourne value growth has been substantially lower over the past decade than over the previous decade,” Mr Kusher said.

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