Pool of affordable housing in capital cities continues to evaporate

Australia’s property market has experienced a significant shift in lower-end priced properties. The selection for properties under the $400,000 mark is diminishing.  

Rising capital city dwelling values has meant that homes selling at a price below $400,000 has declined and is now down to 39.7% of all sales from 44.1% a year earlier.  

Over the 12 months to August 2014, 37.3% of houses and 45.7% of units sold for less than $400,000.  At the same time a year earlier, 42.3% of houses and 48.5% of units sold for less than $400,000.  

Until 2004 the proportion of sales below $400,000 was fairly similar between houses and units.  Since that time the proportion of sales below $400,000 has trended lower however, the rate of decline has been greater for houses than for units.  

This significant divergence in individual capital city home values and growth over recent years has also meant a large difference in the proportion of homes selling below $400,000.

Over the past year, the proportion of all house sales occurring below $400,000 has been recorded at: 

• 12.1% in Sydney;
• 25.1% in Melbourne;
• 32.4% in Brisbane;
• 47.9% in Adelaide;
• 15.3% in Perth;
• 62.8% in Hobart;
• 18.5% in Darwin;
• 7.5% in Canberra.    

20 years ago, more than nine out of every 10 house sales across each capital city were below $400,000. Of course over that time wages have increased, interest rates have tended to be much lower and credit has become much more freely available. Nevertheless, the drop in affordable housing across most capital cities has been substantial.  

Across the capital cities, the proportion of total unit sales below $400,000 over the past 12 months was: 

• 23.5% in Sydney;
• 37.3% in Melbourne;
• 53.8% in Brisbane;
• 67.8% in Adelaide;
• 38.2% in Perth;
• 82.9% in Hobart;
• 32.0% in Darwin;
• 39.0% in Canberra.    

Again 20 years ago almost every unit sold was less than $400,000.  While there has been a decline in unit sales under $400,000 across the board it has been markedly larger in markets like Sydney, Melbourne, Darwin and Canberra.  

Dwelling sales data produced by CoreLogic RP Data showed that over time, houses continued to outnumber units. This is the reason why house sales have a bigger influence on the overall result.    

Options for affordable housing supply, particularly in cities such as Sydney, Melbourne, Perth, Darwin and Canberra have sharply reduced over the past two decades.

Although borrowing for a mortgage has become easier and wages have grown, the supply of lower priced homes drives many lower income earners out of ownership in these cities.

As an example, current figures to the 12 months to August 2014 indicate there has been just 16,345 homes sold below $400,000 in Sydney compared to 97,982 home sales in total. 

With home values continuing to rise in Sydney and Melbourne, we would expect even fewer sales below $400,000 over the coming 12 months.