Bracket creep: Home sales by price point

With dwelling values generally moving higher there are fewer opportunities for buyers on a budget below $400,000 to purchase a home.

Across the combined capital cities, home values increased by 7.9% in 2014 according to the CoreLogic RP Data Home Value Index.house

The increase in values was very much focussed on two of our most expensive capital cities, Sydney and Melbourne.

Auction clearance rates were also high with auction markets tending to reflect conditions across higher priced housing stock.

Looking at what sold across the combined capital cities in 2014, the first chart breaks the proportion of total sales into price brackets.

The $400,000 to $600,000 price bracket accounted for the greatest proportion of both house and unit sales over the year.

The big difference between houses and units is the proportion of sales below $400,000.

Over the year, 22.2% of capital city houses sold under $400,000 compared to 35.3% of units.

Similarly, only 6.1% of unit sales were over $1 million over the year compared to 16.2% of house sales.

Proportion of capital city home sales by price point over 2014, houses vs. units

The second chart highlights the shift in the composition of sales over time as home values have risen. 20 years ago, 95.4% of capital city house sales were below $400,000 compared to 3.0% between $400,000 and $600,000, 1.2% between $600,000 and $1 million and 0.4% over $1 million.

Contrast this with today, where 22.2% of house sales were below $400,000, 33.4% were between $400,000 and $600,000, 28.1% between $600,000 and $1 million and 16.2% above $1 million.

 

Proportion of capital city unit sales by price point over time

no.2

 

It is a similar, albeit not quite as extreme, result for units. In 2014, 35.3% of sales were below $400,000, 34.2% were between $400,000 and $600,000, 24.4% were between $600,000 and $1 million and 6.1% were more than $1 million. 20 years earlier, 95.9% of sales were below $400,000, 2.4% were between $400,000 and $600,000, 1.0% occurred between $600,000 and $1 million and just 0.6% were above $1 million.

 

Proportion of capital city unit sales by price point over time

 no.3

Although the combined capital city data provides an overview of the trends, when you drill down into the individual capital cities you can see some very different trends.

housesLooking at the individual capital cities and across the price brackets, there is a divergence in the price point with the most sales over the year.

For houses, the $200,000 to $400,000 price bracket accounted for the greatest number of sales in Adelaide and Hobart while in Sydney it was the $1 million to $2 million bracket and each remaining city recorded the greatest proportion of house sales between $400,000 and $600,000.

For units, most sales occurred between $200,000 and $400,000 in Brisbane, Adelaide and Hobart and in each remaining city most sales occurred between $400,000 and $600,000.

Some of the more interesting results were that Hobart was the only city in which more than 5% of house sales occurred below $200,000 in 2014.

In Sydney almost a third of all house sales in 2014 (31.6%) were over $1 million compared to 15.7% in Melbourne, 5.5% in Brisbane and 10.7% in Perth.

 

Capital city house and unit sales by price point in 2014

 

The sharp decline in sales below $400,000 over the past 20 years reflects the overall growth in household debt which is attributable to housing.

It also highlights that a large proportion of Australian’s choose to build their wealth by investing in residential property.

Of course, this is a good thing if you own a home but many Australian’s don’t.

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The sharp rise in home values leading to a decline in more affordable homes available for sale makes it more difficult for those renting to save up necessary deposits to enter in to home ownership.

Homes are still selling at affordable price points across all cities however, they are becoming rarer, particularly in our most populous cities.

Most people aspire to own a home however, the high cost of housing in our capital cities will likely mean that for some, particularly those on lower incomes in the bigger cities, the dream of home ownership may only remain as a dream.

Delivering more affordable housing options should be a more prevalent goal of Governments than it currently is.

Of course, more affordable housing options are available outside of capital cities however, employment options and opportunities in these areas are generally much more limited than they are within capital cities.



Want more of this type of information?


Robert Larocca

About

Robert Larocca is RP Data's Victoria Housing Market Specialist. He has built a profile over the past eight years as an expert on the Victorian residential property market. Visit www.rpdata.com


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