Buying affordable housing in capital cities is getting harder and harder

In the capital cities, two out of every three properties sold were for less than $600,000 (68.8%), while in the non-capital markets, nine out of every ten properties sold transacted for below that price point.

As values increase, I expect to see a natural bracket creep in prices.

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.

While across the combined capital cities where most home sales over the past year occurred at a price point below $600,000 (68.8%), at the same time in 2012, 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% in 2012.

Property sales across the remaining price brackets:

– $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%)

– Greater than $2 million (1.5% vs. 1.4%).

There was a significant decline in the proportion of homes selling at more affordable price points where 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 of sales ranged from 90.5% of all sales in Sydney to 98.5% of all sales in Adelaide. There was a significant decline in the proportion of these sales across each major capital city where it was most significant in Sydney with just 25.1% of all sales below $400,000.

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

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. As a comparison, back in August 1995, the figures for the proportion of sales in excess of $1 million across the major capitals were:

– Sydney 1.3%

– Melbourne 0.3%

– Brisbane 0.2%

– Adelaide 0.4%

– Perth 0.1%

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.

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.

Clearly, buyers with a limited budget who are looking to purchase in the capital cities may need to change their search criteria and investigate more affordable markets outside of capital cities. The downside to this is that the challenge in many regional areas can be finding local employment or commuting back to the capital cities for work.

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.