Sharp drop in home sales under $400,000: Cameron Kusher
Escalating dwelling values will see fewer opportunities for budget conscious property buyers, especially if their available spend is around $400,000.
January data released in the latest CoreLogic RP Data Home Value Index showed that home values increased by 7.9% in 2014 with the major focus on two of our most expensive capital cities, Sydney and Melbourne.
Auction clearance rates were also high with auction markets tending to reflect conditions across higher priced housing stock.
Based on 2014 combined capital city sales, properties that sold for between $400,000 to $600,000 accounted for the greatest proportion of both house and unit sales over the year. However, the biggest difference between houses and units is the proportion of sales below $400,000.
Over 2014, 22.2% of all capital city houses sold under $400,000 compared to 35.3% for units. Similarly, only 6.1% of unit sales were over $1 million over the year compared to 16.2% of house sales.
20 years ago, 95.4% of capital city house sales were below $400,000 compared to 3.0% between $400,000 and $600,000, 1.2% between $600,000 and $1 million, and 0.4% over $1 million. Compared with current results where 22.2% of house sales were below $400,000, 33.4% were between $400,000 and $600,000, 28.1% between $600,000 and $1 million and 16.2% were above $1 million.
While not as extreme as the housing result, the results for units were not dissimilar. In 2014, 35.3% of sales were below $400,000, 34.2% were between $400,000 and $600,000, 24.4% were between $600,000 and $1 million, and 6.1% were more than $1 million.
20 years earlier, 95.9% of sales were below $400,000, 2.4% were between $400,000 and $600,000, 1.0% occurred between $600,000 and $1 million and just 0.6% were above $1 million.
Although the combined capital city data provides an overview of the trends, when you drill down into the individual capital cities you can see some very different trends.
Looking at the individual capital cities and across the price brackets, there is a divergence in the price point with the most sales over the year.
For houses, the $200,000 to $400,000 price bracket accounted for the greatest number of sales in Adelaide and Hobart while in Sydney it was the $1 million to $2 million bracket and each remaining city recorded the greatest proportion of house sales between $400,000 and $600,000. For units, most sales occurred between $200,000 and $400,000 in Brisbane, Adelaide and Hobart and in each remaining city most sales occurred between $400,000 and $600,000.
Some of the more interesting results were that Hobart was the only city in which more than 5% of house sales occurred below $200,000 in 2014. In Sydney almost a third of all house sales in 2014 (31.6%) were over $1 million compared to 15.7% in Melbourne, 5.5% in Brisbane and 10.7% in Perth.
The sharp decline in sales below $400,000 over the past 20 years reflects the overall growth in household debt which is attributable to housing.
It also highlights that a large proportion of Australian’s choose to build their wealth by investing in residential property. Of course, this is a good thing if you own a home but many Australian’s don’t. The sharp rise in home values leading to a decline in more affordable homes available for sale makes it more difficult for those renting to save up necessary deposits to enter in to home ownership.