Housing demand by price point- Tim Lawless

Over the past 12 months, more than two out of every three capital city properties and nine out of every ten non-capital city properties sold transacted for less than $600,000.

The capital gains recorded across the housing market since June last year have seen a shift in the price points for properties selling; as values increase you would expect there to be natural bracket creep.

Anecdotally, we are also seeing an increase in buyer demand at the more expensive end of the market, likely driven higher by profits being made in the share market as well as more upgraders choosing now as a time to step up a notch on the property ladder.

Across the combined capital cities, most home sales over the past year have occurred at a price point below $600,000 (68.8%). At the same time a year earlier, 72.1% of all sales occurred at a price below $600,000.

Over the past 12 months, just 5.0% of capital city properties sold for less than $200,000 compared to 4.0% a year earlier, across the other price points the figures were: $200,000 to $400,000 (29.9% currently vs. 33.6% last year), $400,000 to $600,000 (33.9% vs. 34.5%), $600,000 to $800,000 (15.8% vs. 14.2%), $800,000 to $1 million (6.9% vs. 6.1%), $1 million to $2 million (7.1% vs. 6.2%) and greater than $2 million (1.5% vs. 1.4%).    1If we analyse the data for major capital cities over time we can see a significant decline in the proportion of homes selling at a more affordable price point.

Over the 12 months to August 1995, 95.4% of all capital city home sales were below $400,000, across the major capital cities the proportion ranged from 90.5% of all sales in Sydney to 98.5% of all sales in Adelaide.

As the chart shows, there has been a significant decline in the proportion of these sales across each major capital city. The decline has been most significant in Sydney where over the most recent year just 25.1% of all sales were below $400,000.

In Melbourne, the figure was 36.2% followed by: Brisbane (43.7%), Adelaide (62.8%) and Perth (27.1%). In our four largest capital cities the majority of property sales over the past year have been at a price point above $400,000.

2

Looking at chart 3 we see, the recent surge in sales of homes in excess of $1 million, particularly in Sydney. Over the 12 months to August 1995 just 0.5% of all capital city home sales were at a price above $1 million compared to 8.6% over the most recent 12 months.

Back in August 1995, the figures for the proportion of sales in excess of $1 million across the major capitals were recorded at: 1.3% in Sydney, 0.3% in Melbourne, 0.2% in Brisbane, 0.4% in Adelaide and 0.1% in Perth.

Over the most recent 12 months, sales in excess of $1 million accounted for 14.3% of all sales in Sydney, 8.3% in Melbourne, 3.6% in Brisbane, 2.3% in Adelaide and 7.6% in Perth. The proportion of sales in excess of $1 million was at a record high across Sydney over the past year but below the peak elsewhere.

3

The data highlights the challenge of purchasing relatively lower priced housing within major capital cities given that the majority of sales are occurring at prices above $400,000 across most capital cities.

Looking across the individual capital cities you can see that there are divergences in the overall results. In Brisbane, Adelaide and Hobart the greatest proportion of home sales over the past year have been priced between $200,000 and $400,000. In each other capital city, sales between $400,000 and $600,000 have accounted for the greatest number of sales.

As already highlighted, certain cities had an extremely low proportion of sales below $400,000 again highlighting affordability constraints for price sensitive purchasers.

4Overall the results highlight that purchasers on a limited budget are restricted with regards to what they can purchase in most capital cities compared with market pricing ten years ago and even five years ago.

This means that in most instances they will need to sacrifice the type and/or location of the property in order to be able to afford capital city housing. Alternatively, housing tends to be much more affordable outside of capital cities with relatively more affordable property sales abundant in these areas.

Of course the challenge in many regional areas can be obtaining appropriate employment locally or commuting back to the capital city for employment. Nevertheless, for some buyers regional markets may be their only realistic option for which to enter into home ownership given the cost of housing in most capital cities.

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Tim Lawless

About

Tim heads up the Core Logic RP Data research and analytics team, analysing real estate markets, demographics and economic trends across Australia. Visit www.corelogic.com.au


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