With the housing market now almost two years into the growth cycle, a larger proportion of home sales are ‘creeping’ into the higher price brackets.
2013 was a comparatively strong year for the housing market with the number of house and unit sales increasing and home values rising by 9.8% across the combined capital cities.
Median selling prices of capital city homes increased by a greater 10.2% over the year, indicating a shift to more expensive properties transacting throughout the year.
Looking specifically at the combined capital cities you can see that there is quite a difference in pricing between houses and units. Only 27.1% of capital city houses sold for less than $400,000 in 2013 compared to 39.4% of all units.
Unit sales between $200,000 and $400,000 accounted for the greatest proportion of sales in 2013 at 35.7% whereas sales priced between $400,000 and $600,000 accounted for the greatest proportion of house sales at 34.2%. Across the combined capital cities, 12.4% of house sales and 4.6% of unit sales were at or above $1 million.
Outside of the capital cities home prices are typically much more affordable and this is highlighted by the sales throughout 2013.
At a combined capital city level, just 27.1% of house sales were at prices below $400,000 compared to 63.8% across the regional markets.
Similarly, 74.8% of all regional unit sales were below $400,000 in 2013 compared to 39.4% across the combined capital cities.
The market for homes with a million dollar price tag or higher is also smaller in regional markets with just 1.7% of all regional house sales and 2.3% of regional unit sales at a price in excess of $1 million.
Looking at the differences on a state-by-state basis for houses, you can see that across each state the proportion of homes sold below $200,000 and between $200,000 and $400,000 is greater in regions outside of the capital cities (ie rest of state or ROS).
This highlights the fact that typically home prices are lower in regional markets than those in capital city areas.
Of course the availability of jobs is also typically lower in regional markets and wages are often also lower so it is no surprise that subsequently home prices are lower too.
The results for regional unit markets are similar to those for regional houses. Across each capital city the proportion of unit sales below $200,000 is lower than the proportion of sales in the corresponding rest of state area.
Interestingly, in Australia’s two most affordable capital cities, Adelaide and Hobart, the proportion of unit sales between $200,000 and $400,000 is greater within the capital cities than within the regional markets which is probably due to the fact that unit markets outside of these capitals have little depth of stock.
Overall this data highlights that relative to rest of state markets, the selling prices of homes in capital cities is significantly higher.
With around 66% of Australian’s living within a capital city it is clear that competition for housing (particularly well located housing) is driving up the selling price.
Of course the current low mortgage rates are only intensifying this competition. You can see that across each city there are still homes selling at prices below $400,000 however, these homes are becoming rarer.
Not to mention these homes are typically located on the outskirts of the city in areas that are poorly supported by essential infrastructure.
Perhaps businesses and Governments should be looking at ways to create jobs in regional markets as a way of making housing more affordable.
There seems to be an inability or unwillingness of all levels of Government to provide a sustainable fix to housing affordability in our capital cities.
As a result we would expect that the proportion of homes selling below $400,000 will continue to decline over the coming years.