Capital growth: how to estimate it when prices are falling
Over the ten years to August 2026, national home values rose 66.5%, which is about 5.2% a year. But the capitals ranged from 2.4% a year in Melbourne to 7.8% in Brisbane. So do not project one growth rate. Project three: a low, a middle and a high, and make sure the purchase still works on the low one.
A capital growth calculator does one sum. It takes today's value, applies a yearly rate, and compounds it. The sum is easy. The rate is the whole question.
And right now the most recent evidence is pointing down. Values have fallen for six months. So what rate do you use?
Key facts, as at 12 September 2026
- National dwelling values, past ten years: up 66.5%, about 5.2% a year
- Past five years: up 23.9%
- Past twelve months: up 2.7%
- Houses, average over a ten year hold: 6.1% a year. Units: 4.8%
- Treasury's view of the long term rate for residential property: about 5% a year
Sources: Cotality Home Value Index, Treasury
Ten years, eight different answers
Here is what each capital did over the past decade, turned into a yearly rate.
| Capital | Ten year change | Per year | Five year change |
|---|---|---|---|
| Brisbane | up 111.8% | 7.8% | up 64.1% |
| Adelaide | up 107.1% | 7.6% | up 64.0% |
| Perth | up 102.6% | 7.3% | up 79.7% |
| Hobart | up 93.5% | 6.8% | up 11.5% |
| Canberra | up 58.8% | 4.7% | up 6.3% |
| Sydney | up 44.4% | 3.7% | up 5.6% |
| Darwin | up 34.0% | 3.0% | up 30.6% |
| Melbourne | up 26.6% | 2.4% | down 3.9% |
| National | up 66.5% | 5.2% | up 23.9% |
The yearly rate is our own arithmetic on Cotality's ten year totals.
Read it carefully, because it is a trap. Ten years ago, few people would have picked Brisbane and Adelaide to double while Sydney and Melbourne trailed. The cities at the top of a ten year table are the ones that have already had their growth.
Hobart shows the same thing inside one city: up 93.5% over ten years, but up only 11.5% over the last five.
Why one number is the wrong idea
Small differences in the rate become large differences in the result.
| 7.5% a year | 5% a year | 2.5% a year | |
|---|---|---|---|
| Today | $800,000 | $800,000 | $800,000 |
| Year 2 | $924,500 | $882,000 | $840,500 |
| Year 4 | $1,068,375 | $972,405 | $883,050 |
| Year 6 | $1,234,641 | $1,072,077 | $927,755 |
| Year 8 | $1,426,782 | $1,181,964 | $974,722 |
| Year 10 | $1,648,825 | $1,303,116 | $1,024,068 |
Source: Presm arithmetic. Growth compounded yearly.
| Growth rate | Value after ten years | Gain |
|---|---|---|
| 2.5% a year | $1,024,068 | $224,068 |
| 5% a year | $1,303,116 | $503,116 |
| 7.5% a year | $1,648,825 | $848,825 |
The high case earns nearly four times the low case. Each is close to what a real Australian capital delivered over the last decade: Melbourne near the bottom, Canberra near the middle, Brisbane at the top.
These are the same three rates Treasury uses in its own examples of the new capital gains rules. At 2.5% inflation, the low case is no real growth at all.
How we would choose the three rates
Low: inflation. Assume the property only keeps pace with prices, about 2.5%. If the purchase falls apart at this rate, you are relying on growth to rescue it.
Middle: the long term national figure. About 5%. Not the city's best decade. The country's ordinary one.
High: the area's own ten year rate, if it is above 5%. Use it to see the upside. Do not use it to justify the price.
Lower the rate for units. Treasury's twenty year figures put units 1.3 points a year behind houses over a ten year hold.
Start from today's value, not the peak. If the home was worth more in March, that is history. Growth compounds from what you pay.
Growth now changes your tax too
From 1 July 2027, capital gains are indexed for inflation in place of the 50% discount. That favours slow growth and costs fast growth more.
On Treasury's figures, an investor on $100,000 with a $500,000 asset held ten years pays $24,858 less tax at 2.5% growth, $8,075 more at 5%, and $58,851 more at 7.5%. So the after tax gap between your three cases is narrower than the table above suggests. We explain it in capital gains tax after the discount.
Our view
Growth is a hope. Rent and interest are facts. We would decide on the facts first, using the low case, and treat anything above it as upside.
To see where each city sits today, read a fifth month of falling home values.
Frequently asked questions
What is a realistic capital growth rate for Australian property?
Over the ten years to August 2026, national dwelling values rose 66.5%, which is about 5.2% a year. Treasury describes 5% as similar to longer term returns on residential real estate. Individual cities ranged from 2.4% to 7.8% a year.
How do I calculate capital growth?
Multiply the value by one plus the growth rate, once for each year. A property worth $800,000 growing at 5% a year is worth about $1,303,000 after ten years.
Which capital city had the highest growth over ten years?
Brisbane, up 111.8% over the ten years to August 2026, about 7.8% a year. Adelaide was close behind at 107.1%. Melbourne was lowest of the capitals at 26.6%.
Do houses grow faster than units?
On average, yes. Treasury's analysis of twenty years of Cotality data shows houses averaging 6.1% a year over a ten year hold, against 4.8% for units.
Sources
- Cotality, Home Value Index, change in dwelling values over key time periods, 1 September 2026
- Treasury, Negative Gearing and Capital Gains Tax Reform fact sheet, Table 1 and cameos, Budget 2026 to 27
Past growth does not predict future growth. This is general information, not financial advice.