Affordable property gains appeal…but will it last?

As the luxury home market feels the weight of Australia’s property slowdown and values in the sector take a dive, buyer attention turns to more affordable opportunities and creates some positive growth in its wake.

According to a Smart Company report, the combined capital city median house price for the March 2011 quarter was sitting at $478,000, with 20 per cent of the most expensive capital city suburbs recording a fall in values of -5.4 per cent over the 12 months to April 2011.In comparison, the most affordable end of the market only took a 0.5 per cent fall, with the majority of the property sector – the mid-range 60 per cent of all housing – recording a decline of 0.9 per cent.

Some high end suburbs were harder hit than others, with Perth’s prestigious riverfront address of Mosman Park experiencing a staggering 43.1 per cent drop in median house prices since peaking in August 2008. Rubbing salt into the wounds, the city of Perth now holds nine of the worst performing council regions in the country.

Interestingly, the areas that have held firm when it comes to property values, including 10 out of 14 regions where the current median represents an historical high, have a median house price below $500,000.

Additionally, none of the areas listed as the top 25 performing capital city regions for the period have a median house price greater than $1 million, with 14 of the best boasting a median below $500,000.

Smart Company says this data supports the emerging trend of a weakening in the high end property sector, which is being impacted by consumer conservatism, interest rates, the poorly performing equities market and unstable economic conditions across the globe.

I would agree – the top end of the market is likely to perform poorly for some time yet and won’t turn around until business profitability increases and the stock market starts to perform better.

I think the next sector to suffer will be the more affordable areas as demand is impacted by rising interest rates (yes they eventually will increase, but maybe not as soon as some of us expected) and the continuing lack of consumer confidence we’re currently seeing.

On the other hand, there is currently strong demand for well located properties in the middle price range – say $400 – $650,000 from investors, owner occupiers and tenants.

Source: Smart Company


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