Five-year capital growth rates show how property has stalled since the GFC

Since the onset of the Global Financial Crisis (GFC) in 2008, growth in capital city home values has been much more subdued.

Apart from the economic factors, the slowdown in capital gains can also be attributed to the fact that consumers have increased their level of savings and have subsequently reduced their levels of spending (particularly for housing).

Over the five years to August 2012, home values across the combined capital cities increased at an average annual rate of just 2.4%. Over recent years the rate of capital gains in the housing market has been slowing as the cost of purchasing a home has risen.

Breaking down the market performance into five-year increments highlights the recent slowdown in value growth. Between August 1997 and August 2002, capital city home values increased at an average annual rate of 12.0%.

This rate of growth slowed to 8.4%pa between August 2002 and August 2007 and has further slowed to 2.4%pa over the most recent five years. These results clearly show that as housing has become more expensive over time and since the onset of the GFC capital gains have significantly slowed.

In every capital city, average annual capital gains in the market have been stronger over the first five years of the past decade than they have been over the most recent five years. In fact, across each city except Sydney, the rate of average annual growth over the past five years has been less than half that of the previous five years. Further highlighting the slowdown is the fact that over the last decade, every city except Sydney recorded average annual capital gains of more than 6%, while over the past five years the best performing capital city, Darwin, has recorded average annual gains of just 4.6% pa.

As mentioned in the headline, the rate of inflation has been recorded at an average of 2.8% on an annual basis over the past five years. Given this, growth in home values over the past five years has been below the rate of inflation in Brisbane (0.2%pa), Adelaide (2.4%pa), Perth (-0.9% pa) and Hobart (-0.6%pa); while Sydney values have grown in line with inflation.