With competition at auction still fairly strong, nabbing a home for under $750,000 is getting difficult in most major capitals. Picture: Monique Harmer
Decades of explosive growth in home prices have ruptured the bottom rung of the Australian property ladder, with new data revealing sub-$500,000 homes are disappearing from the market while those priced $500,000 to $750,000 are also on the endangered list.
The analysis of national listings by research group FoundIt revealed there was another rapid deterioration in affordability over the past year.
This decline, coupled with a hike in interest rates this week, looks poised to lock even more people out of homeownership, leaving them stranded in the pressure cooker rental market.
FoundIt analyst Kent Lardner said affordable housing choices were shrinking even in areas where there were higher levels of construction.
“Once you go below $750,000 your options for housing go off a cliff,” he said.
The scant supply of affordable listings was pushing more and more people to poorly connected outer suburbs or areas just beyond the urban fringe, Mr Lardner said.
FoundIt’s research showed the choice of homes listed at each price varied considerably across capitals:
SYDNEY
See the Sydney suburbs with most listings under $750k
The FoundIt study suggested the entry-level market in Australia’s most expensive city was on the verge of extinction.
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Following years of runaway price growth, properties listed for under $500,000 now make up just 4 per cent of all city listings, a collapse from the early 2010s when such prices were the norm.
Sydney properties priced above $2m outnumbered sub-$500,000 listings by a factor of four to one. Listings above $2m also constituted nearly 20 per cent of the Sydney market.
For those trying to break in, the reality was a brutal “distance trade-off,” Mr Lardner said.
Sydney’s $2m+ homes outnumbered homes under $500k by four to one. Picture: Gaye Gerard
“Affordability here is paid for in commute time, dwelling quality, or both,” Mr. Lardner said.
Agents revealed that the government’s First Home Guarantee Scheme has worsened the situation by creating even more demand at the lower end.
BRISBANE
See the Brisbane suburbs with most sub-$500k homes
In a shocking development, Brisbane is now tougher for first-home buyers to break into than Sydney at the lowest price points.
Once considered the great escape for priced-out Sydneysiders or Melbournians, Brisbane has seen its cheap stock vanish.
Brisbane buyers will now need markedly higher budgets than only a few years ago – all at a time when their borrowing power is diminishing because of rate rises.
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The FoundIt data showed only 3.2 per cent of homes in Greater Brisbane sold for less than $500,000 over the past year – a lower percentage than even Sydney.
Mr Lardner attributed the low supply of cheaper listings to rampant investor demand and a failure to build enough high-density housing.
Investors armed with spreadsheets have “swarmed the market” for years, targeting properties under $750,000 for high rental yields, effectively gobbling up the stock meant for first-home buyers, he said.
“When you look at the numbers, it does slap you in the face,” Mr. Lardner said, noting he remembers when properties cost $115,000 in areas that are now unaffordable.
MELBOURNE
See Melbourne’s suburbs with most listings under $750k
In stark contrast to its northern neighbours, Melbourne has staked its claim as the nation’s best capital for first-home buyers, largely because it made the hard decision to go down the development path decades ago, FoundIt revealed.
Almost half of the properties sold across Melbourne last year went for less than $750,000, with the city retaining a functioning entry-level market due to a high volume of high-rise construction 20 to 30 years ago.
FoundIt analyst Kent Larnder said Melbourne was the best market in the country for first-home buyers.
“Melbourne is the best value for first-home buyers among the major capitals, by quite some margin,” Mr. Lardner said.
The market has been aided by an exodus of investors who fled the city due to poor capital growth, leaving less competition for first-home buyers.
But buyers were warned this window may be closing.
Mr Lardner said a “contrarian” wave of investors was beginning to stream back into Melbourne, seeking value where other capitals have reached their affordability limits.
ADELAIDE
See the Adelaide suburbs with most listings under $500,000
A mere 5.22 per cent of all sales in metropolitan Adelaide were in the sub-$500,000 price bracket, FoundIt revealed.
The dominant price bracket was $750,000 to $1m, and accounted for 35.72 per cent of all sales.
It wasn’t long ago that the average Adelaide home was about $500,000. Now only 5 per cent of city stock is priced below this.
It was closely followed by $500,000 to $750,000, comprising some 30.92 per cent of all sales.
Those looking to buy in the $1m to $1.25m category had 13.12 per cent of Adelaide’s listings to pick from, while 6.91 per cent of all properties fell into the $1.25m to $1.5m bracket.
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