Buyer's Glossary
Capital Growth
How much a property's value rises over a year, as a percentage.
What it is
Capital growth is the percentage increase in a property's value over a year.
An $800,000 home growing at 6.4% a year doubles to $1.6 million in about eleven years. At 4% it takes about eighteen. That seven-year gap is the real cost of underperformance.
The long-run average for Australian houses over 30 years. Source: CoreLogic.
Why it matters
Weak growth
- Value barely moves, or falls after inflation
- Often oversupply or an affordability ceiling
- The result = your equity builds slowly
Strong growth
- Value climbs above the long-run average
- Usually supply constraint plus migration
- The result = equity you can use
What counts as high, what counts as low
Shaded from a buyer's point of view: teal is favourable if you are buying, amber is balanced, red is harder. That is why this looks inverted against some other metrics, because a fast-moving market is good for a seller and hard for a buyer.
The benchmark is the 30-year house average of about 6.4% a year. Source: CoreLogic. Use the long-run figure, not the current 12-month reading, which was running above trend.
The trend to watch for
Single-year figures are volatile and backward-looking. Look at five and ten-year compounding instead, and remember a "strong" year can just as easily mean you are buying at a cyclical peak.
Houses out-grow units over the long term, roughly 5.6% against 4.7%. Pair growth with yield and aim for a combined figure around 10%.
What it looks like in the real world
Weak growth
under 4%
- New-stock oversupply, typically inner-city units
- High vacancy
- An affordability ceiling the market cannot push through
Strong growth
7% and over
- Supply constraint plus interstate migration
- Rate cuts catalysing demand
- Often follows a long lagging period