Fewer homes selling at lower price points as value growth surges

There’s no doubt about it, housing is becoming more expensive as home values rise. 

The escalation in the cost of housing is forcing households to spend more to purchase a home; subsequently the deposit is also higher forcing many first home buyers to wait until later in life to purchase a home or consider a more affordable location/housing type than what they would have previously accepted.

Looking at the combined capital cities, over the 12 months to April 2014, home sales between $400,000 and $600,000 accounted for the greatest proportion of sales of houses and units at 34.5%. 

Home sales of properties priced between $200,000 and $400,000 accounted for the second largest proportion (26.8%) followed by: $600,000 to $800,000 (17.2%), $1 million to $2 million (9.2%), $800,000 to $1 million (8.2%), less than $200,000 (2.2%) and $2 million or greater (2.0%).

Over the past 12 months there has been almost as many capital city home sales over $2 million than there have been below $200,000.  Clearly low income earners are finding it increasingly difficult to purchase homes in capital cities.

Chart 1

The above chart shows the proportion of capital city home sales by price point over time.  The emerging trend is the sharp decline in sales under $200,000 over time and the recent decline in sales of homes priced between $200,000 and $400,000.

As you’d expect, sales which previously occurred within these two price points are pushing higher with an increasing prominence of sales between $400,000 and $600,000 and $600,000 and $800,000.

Obviously across capital cities the performances are much more varied across individual price points and it is important to analyse the emerging trends.

Chart 2

Across the combined capital cities, sales of homes for less than $200,000 accounted for just 2.2% of all sales.  Across the individual capital cities the proportions were: Sydney (1.7%), Melbourne (1.5%), Brisbane (2.4%), Adelaide (6.0%), Perth (1.4%), Hobart (13.5%), Darwin (4.8%) and Canberra (0.9%).

It is extremely noticeable that there has been a deterioration in the availability of homes for less than $200,000.  Even in relatively more affordable capital cities like Adelaide and Hobart, the proportion of sales below $200,000 is low.  In fact, in Sydney and Melbourne there have been more sales over $2 million throughout the year than sales below $200,000.

Chart 3

26.8% of all home sales across the combined capital cities were between $200,000 and $400,000 over the 12 months to April 2014.  At the individual capital city region, the proportions were recorded at: Sydney (17.3%), Melbourne (29.1%), Brisbane (37.7%), Adelaide (48.4%), Perth (19.8%), Hobart (54.3%), Darwin (19.8%) and Canberra (20.0%).

In Adelaide and Hobart, the greatest proportion of sales over the year occurred at this price point.  In each city, the proportion of sales occurring between $200,000 and $400,000 is falling, highlighting the shortening supply of capital city homes available at more affordable price points.  In Sydney for example, more properties transacted for more than $1 million (18.9%) than sold for between $200,000 and $400,000.

Chart 4

Capital city homes sold between $400,000 and $600,000 accounted for the greatest proportion of total sales, making up 34.5% of sales over the 12 months to April 2014. In Sydney, home sales priced between $400,000 and $600,000 accounted for 29.6% of sales over the year.

Elsewhere the proportion of sales between $400,000 and $600,000 were recorded at: Melbourne (33.9%), Brisbane (38.3%), Adelaide (30.1%), Perth (43.2%), Hobart (23.3%), Darwin (41.5%) and Canberra (51.7%).

In each city other than Adelaide and Hobart the $400,000 to $600,000 price point has recorded the greatest number of sales over the year. Interestingly, in Sydney, Melbourne and Darwin the proportion of sales within this price point is trending lower, further indicating affordability constraints in these cities.

Chart 5

Over the 12 months to April 2014, 17.2% of capital city homes sold transacted at a price point between $600,000 and $800,000.  Across the capital cities, the proportion of total sales within this price point was recorded at: Sydney (20.5%), Melbourne (17.0%), Brisbane (13.1%), Adelaide (9.2%), Perth (19.0%), Hobart (5.8%), Darwin (23.3%) and Canberra (18.1%).

Across all capital cities, the proportion of sales occurring between $600,000 and $800,000 has increased over the past year.

Chart 6

8.2% of capital city home sales were at a price between $800,000 and $1 million over the past year, increasing from 6.7% a year earlier. At an individual capital city level, the proportion of sales was recorded at: Sydney (15.3%), Melbourne (8.0%), Brisbane (4.6%), Adelaide (3.2%), Perth (7.8%), Hobart (1.7%), Darwin (5.8%) and Canberra (5.7%).

Like the $600,000 to $800,000 price point, the proportion of sales sitting within this price point has risen over the year across each capital city.

Chart 7

Across the combined capital cities, there were more home sales between $1 million and $2 million (9.2%) than there were sales below $200,000 (2.2%) over the 12 months to April 2014.

The proportion of homes sold for between $1 million and $2 million rose across each city except Hobart over the past year.  At an individual city level, the proportion of sales between $1 million and $2 million was recorded at: Sydney (15.3%), Melbourne (8.8%), Brisbane (3.4%), Adelaide (2.5%), Perth (7.6%), Hobart (1.2%), Darwin (3.5%) and Canberra (3.1%).

The data shows that Sydney, Melbourne and Perth are the key drivers between the rising proportion of sales between $1 million and $2 million.  Ten years ago just 2.5% of capital city home sales were at a price between $1 million and $2 million.

Chart 8

2.0% of capital city home sales over the 12 months to April 2014 were at or more than $2 million which was the greatest proportion on record.  Across individual capital cities, the proportions were recorded at: Sydney (3.5%), Melbourne (1.9%), Brisbane (0.6%), Adelaide (0.5%), Perth (1.3%), Hobart (0.3%), Darwin (1.4%) and Canberra (0.5%).  Ten years ago just 0.7% of capital city home sales were at or more than $2 million.

[sam id=37 codes=’true’]The data presented highlights the impact of home value growth with fewer lower priced properties selling in the capital cities (particularly in markets like Sydney and Melbourne).

Although the analysis is interesting at a capital city level, individual areas and suburbs and regions can be very different across broad areas like capital cities.

Given this, it is important when selling or buying to understand where the property sits in the context of the local and broader market.  Often times purchasers won’t be looking exclusively in one suburb so an understanding of what areas offer a similar price point may help when selling especially if the subject property is in a suburb which offers advantages over other areas.

Keep in mind that this analysis has been undertaken across the dwelling market (i.e. it is looking at a combination of houses and units).  Units are becoming an increasingly popular alternative to houses in many cities because they are generally more affordable and offer the opportunity to live in a more desirable location than a house would at the same price point.

Now more than ever buyers are likely to be comparing the cost of a unit or townhouse to the cost of a detached house. This is a point that should be clear to buyers and sellers of any property, particularly as affordability constraints and a subsequent shortening supply of more affordable capital city housing stock grows.



Want more of this type of information?


Cameron Kusher

About

Cameron Kusher is Corelogic RP Data’s senior research analyst. Cameron has a thorough understanding of the fundamentals such as demographics, trends & economics. Visit www.corelogic.com.au


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