The cities where house prices should soon play catch-up

SYDNEY and Melbourne have had their property booms, so is it time for the also-rans to enjoy some big gains of their own? Here’s what history suggests.

IT looks like house prices in a majority of capital cities seem set for a positive push higher.

While property prices don’t double every decade like the old saying used to tell us, over 20-year time frames they have historically done very nicely, suggesting that a game of catch-up is looming for all capitals apart from Sydney and Melbourne.

The latest Australian Bureau of Statistics residential property price indexes show that in the past decade Sydney homes are up 95.1 per cent and Melbourne is up 82.2 per cent, but the big gains stop there.

Hobart house price rises have led the nation in the past year, but may climb higher.

Adelaide home prices climbed only 29.9 per cent between December 2007 and December 2017, while Brisbane rose 26.4, Hobart increased 39.5 per cent, Canberra 39.3 per cent and Darwin 22.6 per cent. Perth has been the straggler, up just 4.2 per cent in a decade.

As the property price boom appears over in the big capitals, it has left a huge gap between median house prices there and elsewhere.

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The last time we had such a big gap, the smaller cities spent several years closing some of it with booming house prices of their own.

The ABS data doesn’t go back beyond 2003, but Real Estate Institute of Australia figures do.

They show that between 1997 and 2007, all of the smaller capitals delivered higher house price growth than Sydney and Melbourne, and every city at least doubled in value.

In the decade before that, from 1987 to 1997, some smaller cities struggled. Is there a pattern here?

Aussie house prices have always doubled over a 10-20 year period.

Nothing is certain when it comes to property price rises because there are more factors at play than simply playing catch-up. Supply and demand, economic performance and jobs growth will also affect prices, but there does appear to be a tipping point with overall house prices.

Adelaide, Hobart and Brisbane home prices are unlikely to be as high as Sydney and Melbourne because of the relative lack of size and job opportunities, but being part of Australia means they share the same tax treatment and laws.

And with Aussies able to move freely between cities and states, and lifestyle playing a bigger role than ever before, any city too crowded, too expensive or too unpleasant could lose residents to its rivals.

Several national real estate experts have put smaller cities such as Adelaide and Hobart near the top of their lists for growth potential in the next year or two.

Whether that happens remains to be seen, but if you’re hoping for real estate price rises, you’d rather be owning real estate in Adelaide, Brisbane, Perth or Hobart than in Sydney or Melbourne at the moment.

@keanemoney