The level of tree and sea changers fleeing capital cities during the global financial crisis has slowed dramatically and driven, in part, the increase in population for both Sydney and Melbourne.
This twist in favour of urban living is pushing value growth in the property market in various capital cities around Australia and as a result is having influence on the combined capital cities index.
According to the RP Data CoreLogic Home Value Index released last week, capital city home values recorded their largest rise for the period since 2007.
The index found since the initial growth phase in June 2012 that was preceded by 19 months of value falls, combined capital city home values have now increased by 18.7 per cent.
Year-on-year growth has largely come from Sydney (16.2 per cent), Melbourne (11.7 per cent) and Adelaide (5.9 per cent).
RP Data senior research analyst Cameron Kusher said you would typically find growth in Sydney and Melbourne first, closely followed by Brisbane, Adelaide and Perth growing from between 12 to 18 months later, which has not happened as yet.
Mr Kusher said the reason that has not happened for the last 28 months is directly related to the GFC.
“We are not seeing an outflow of residents from NSW and Victoria into other states like we did before the financial crisis,” Mr Kusher said.
“If you’ve got a good job, and you’re in Sydney or Melbourne, you’re less inclined now to risk that and move to another part of the country ever since the financial crisis, and I think that’s what is holding back those cities to some degree.
“The RBA seems pretty blasé about the growth at the moment but what would change things is the introduction of macro-prudential tools like those being used in New Zealand or the UK to limit how much higher-risk lending banks can do - but to date it has been fairly reluctant.”
Mr Kusher added the RBA has hinted it is not too keen on using such methods, nor using an interest rate hike as a lever, but suggested while interest rates are low we will see growth in the housing market, particularly Sydney and Melbourne.