The AFR has an article today reviewing the relative performance of the Australian capital city and 'rest of state' housing markets quoting myself and the RP Data-Rismark Hedonic Indices. Using our indices, the article correctly notes that non-capital city house prices have risen by only 5.6% in the 12 months to end April. In contrast, capital city house prices have appreciated by a much stronger 11.6% over this period.
One slight misunderstanding is that the AFR suggests I had said the RBA historically ignored the rest of state areas when considering house prices. This is incorrect. As I have noted here many times before, the RBA was, in fact, the agency responsible for asking us to first construct a hedonic house price index covering the non-capital city regions. If it was not for the RBA, this index would not exist. By number of dwellings, the non-capital city areas account for roughly 40% of all households and are therefore very important. The media and industry generally, not the RBA, have historically neglected this sector of the market.
Going forward, we are trying to focus folks' minds more on the non-capital city regions. With this objective at hand, the table below summarises the 12 month capital growth rates to each city and relevant rest of state (or RoS) market. The consistent differential is clear.
