Pricey postcodes

Despite the fact dwelling values climbed 11.1% during 2009 the story was much different across different price points and markets, with more expensive properties generally seeing the strongest growth.

During 2009 the residential property market rebounded well following a peak to trough fall in property values of 3.8% between February 2008 and December 2008.

On a national basis, the top 20% of most expensive postcodes have recorded the strongest property value growth during 2009 increasing by 11.9% during the year. Meanwhile the middle 60% of postcodes nationwide have seen property values grow by 11.8% and the 20% of most affordable postcodes have recorded value growth of a much lower 8.2%.

The most interesting detail of these results is that the recovery was initially led by the most affordable end of the market which recorded value growth of 3.9% during the 1st quarter of 2009 which cooled to 0.0% value growth during the 4th quarter. Meanwhile the top 20% of postcodes recorded the strongest rate of growth during the 2nd (3.4%) and 3rd (4.1%) quarters whilst the middle 60% of postcodes recorded the strongest growth during the final quarter of 2009 (2.7%).

On a capital city basis across Australia’s five largest cities the performance across the three market segments has varied during the last five years.

Sydney
The top 20% of postcodes have recorded value growth of 12.5% with the middle market recording 11.8% growth and the lower end seeing growth of 9.1% during 2009. Taking a more historical view, the strongest growth in values has consistently been recorded across the top 20% of properties in fact, during each year except 2008 the most expensive suburbs have recorded the strongest value growth whilst the most affordable 20% have consistently underperformed more expensive property.

Melbourne
The top 20% of postcodes have recorded value growth of 16.9% during 2009 as has the middle market whilst the lower end recorded growth of 12.3%. Like Sydney, the top 20% of sales have consistently recorded the strongest annual growth in values over the last five years with 2008 being the lone exception when values fell -9.0%. The most affordable properties are the ones which have consistently witnessed the lowest level of annual value growth.

Brisbane
During 2009, the top 20% of postcodes have recorded value growth of 13.9%, whilst the middle market has recorded growth of 7.6% and the lower end has recorded minimal growth of 2.5%. On an annualised basis over five years the most expensive properties have generally recorded the strongest level of value growth and the middle 60% of sales has generally seen the lowest value growth.

Perth
Perth has performed vastly different from the east coast markets over recent years. During 2009 the top 20% of postcodes witnessed the lowest level of growth (1.0%) whilst the lower end has recorded growth of 4.6% and the middle market has been the standout performer with 9.2% value growth. Perth has been a bit of a mixed bag: in 2005, 2006 and 2009 lower priced stock was the best performer, in 2007 higher priced stock performed the strongest and in 2008 it was the middle end of the market performing strongest.

Adelaide
Like Perth, Adelaide hasn’t followed the trends of the east coast markets during the last year with the top 20% seeing the lowest level of growth (5.4%) whilst the middle market has recorded growth of 6.0% and the lower end market has been the standout performer with 6.6% growth. Over the last five years, the middle 60 percent of suburbs has generally recorded the strongest annual value growth and the most expensive suburbs have generally recorded the lowest level of value growth.

The results highlight that although macro trends may show one thing, the reality in any given area can be quite different. The results also highlight just how quickly market dynamics can change over the course of a timeframe of as little as just one quarter. Cities on the Eastern Seaboard tend to witness the most expensive properties generally recording the strongest value growth but this market is also susceptible to largest falls (higher risk better return). Meanwhile in Perth and Adelaide the last five years has seen strongest value growth generally recorded amongst more affordable markets.

Tim Lawless is the Director of Property Research at RP Data.