A quick update on where the largest declines in residential property values have been experienced and where the largest capital gains have been recorded across the country.
The bar charts below show the top 30 statistical divisions nationally for the largest ‘peak to current’ decline in dwelling values (i.e. change in house and unit value from their respective market peak through to the end of May 2013) and the largest annual capital gains over the past five years (based on compounding growth rate).
The largest corrections have clearly been recorded across the coastal and lifestyle markets; more particularly the largest declines are most concentrated across unit dwellings within these regions. There are a variety of factors that have caused values to fall substantially in these areas:
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- Unit dwellings within the lifestyle regions generally show a larger proportion of investor owners and holiday home/second home owners. In times of financial distress, the investment property or second home will often be the first to be divested. A large number of properties were added to the market in these areas at a time when buyer demand was virtually non existent.
- Additionally, unit dwellings within these markets are often more reliant on short term holiday rentals or long term rental demand from service workers associated with the tourism and retail sectors, both of which have shown weakness post-GFC.
- These markets were prime beneficiaries of the ‘sea change’ phenomenon where retirees or prospective retirees were driving migration and housing demand in these locations. I would expect that this trend (and hence housing demand) has slowed substantially as many retirees and prospective retirees look to rebuild their wealth post GFC before embarking on their sea change.
- There’s also the fact that most of these markets recorded a strong run up in values pre-2008 and were arguably overvalued.
For those individuals who have aspired to own a holiday home or relocate to one of these lifestyle markets the buying opportunities are now looking much more affordable than they were back in 2007.
The largest gains have generally been recorded across regional markets around the country, particularly those associated with the mining sector.
The Pilbara region of Western Australia stands out as recording the highest rate of capital gain at 19.8% per annum over the past five years.
This is clearly a spectacular return, however many of these mining regions are now showing a substantial slowdown in buyer demand as the resources sector transitions out of a very strong phase of infrastructure investment and growth.