Australia's most affordable inner city suburbs
Many Australian’s would like to live in the inner city areas of their capital city where the amenities are most abundant, but sadly the cost of housing is generally restrictive.
According to the RP Data Home Value Index results for July 2014, combined capital city home values increased by 10.2% over the 12 month period. The greatest annual increases in values have been recorded in Sydney (14.8%) and Melbourne (11.0%). In all other capital cities the total value growth over the past year has been less than 7%.
A familiar trend we are witnessing across most cities is that demand for housing is particularly strong across the inner city areas of the city. With mortgage rates low, buyers are battling it out to purchase those homes close to the city centre. Of course areas closer to the CBD tend to be much more expensive than those areas further away. Inner city suburbs are also generally better serviced by both essential and desirable amenities such as: schools, medical services, shopping centres, social amenity, roads and public transport infrastructure.
In certain capital cities the cost of housing is restrictive in these areas due to a high level of demand which has pushed housing costs out of the reach of many perspective buyers. Coupled with high demand is inherently low levels of supply; it is much more challenging to release new detached close to the city due to the limited availability of developable land. Of course there remain alternative options such as units however even units in certain cities have restrictive price points.
Looking at those suburbs with the most affordable median value within a 10 kilometre radius of the CBD across the cities we can see a large divergence in results. For example, in Sydney Wolli Creek has the lowest median house value at $710,303 (not very affordable) and in Melbourne the most affordable suburb is Bellfield at $533,252. In most other capital cities, except for Darwin the starting point for a house is significantly lower. Of course, in many cities these areas are less desirable than other inner city suburbs however, they remain close to the city and potentially have scope for urban renewal over the coming years.
Turning to the unit markets, home values are typically much more affordable closer to the city centre than they are for houses. Again, this doesn’t mean that they are affordable or practical for everyone. It is also interesting to note that the divergence in results from city-to-city. For example Kilburn is the fifth most affordable suburb for houses in Adelaide with a median of $349,925. The most affordable suburb for units in Sydney’s inner city is Eastlakes with a median of $452,776 which is significantly higher than the median house value of Kilburn. Nevertheless, the median value of units is much lower than the median house values across most cities. No wonder we are seeing such a rise in inner city unit construction with so much demand and a lower price point compared to comparable houses.
RP Data anticipates that home values in inner-city areas are likely to continue to increase, particularly as mortgage rates remain at such low levels. As a result more and more potential buyers are likely to be priced out of the inner city housing market. This creates some good opportunities for other areas of the city to see increased demand.
If buyers can’t afford to purchase a home within the inner city, they will most likely look to those locations that tick as many of the inner city boxes, just at a lower price point than the inner city areas. Given this, suburbs with features such as: quality public transport connections, abundant retail and social amenity, quality schools and medical amenity will likely see renewed interest as inner city buyers look to these more affordable alternatives.
