Property proves a good purchase
Almost half of all Australian properties are now worth double their purchase price, writes RP Data’s Cameron Kusher
At the end of September, RP Data released its first ‘RP Data Equity Report’. The report compares the current value of houses and units with their purchase price.
The analysis doesn’t include details of the amount of their home loan that owners have paid off, or whether they have used the equity to reinvest, but it does indicate their likely financial position or ‘base line’ equity.
The results are encouraging. The report found that only 3.7 per cent of Australian properties are currently valued at lower than the price paid at purchase (known as ‘negative equity’).
By contrast, about 45 per cent of Australian properties are now worth more than twice what their owners originally paid for them.
Instances of negative equity were lowest in the Australian Capital Territory (just one per cent), Victoria (1.8 per cent) and South Australia (three per cent).
Meanwhile, Queensland had the highest instance of houses worth less now than when they were purchased (6.3 per cent) followed by Western Australia (4.9 per cent) and the Northern Territory (4.4 per cent).
Of the capital cities, negative equity levels were lowest in Canberra (one per cent), Melbourne (1.4 per cent) and Adelaide (2.4 per cent). Negative equity was most prevalent in Darwin (4.8 per cent), Brisbane (4.1 per cent) and Perth (3.9 per cent).
Negative equity levels were lower in the capitals than across their respective states (except for Darwin/Northern Territory).
Some of the weakest regional markets include far north Queensland, where negative equity accounted for 13.5 per cent of houses, southeast WA (11.2 per cent), the Gold Coast (9.9 per cent), southwest WA (9.8 per cent) and the lower great southern region of WA (9.8 per cent).
Interestingly, each of these five regions is located in either Queensland or Western Australia and in coastal locations.
Property values grew significantly in the lead up to the financial crisis, but coastal markets have typically tended to underperform significantly ever since due to slower demand stemming from decreasing rates of population growth and interstate migration as well as from weaker tourism and retail sectors.
The results of the first ‘RP Data Equity Report’ indicate that capital city housing markets are, overall, in fairly good shape, with strong value growth over most of the past decade.
However, it will be important to note any changes in instances of negative equity over the coming months as value growth continues to slow.