‘Extinction’: Key Aus home market on the verge of collapse – realestate.com.au

Decades of booming house prices have breached the bottom rung of Australia’s property ladder, with new data showing homes under $500,000 are disappearing from the market, while homes priced from $500,000 to $750,000 are also on the extinction list.

The analysis of national lists by research group FoundIt showed that there has been another rapid deterioration in affordability in the past year.

This drop, coupled with a rise in interest rates this week, appears to be leaving even more people unable to buy their own homes, leaving them stuck in the pressure cooker rental market.

FoundIt analyst Kent Lardner said affordable housing choices are shrinking, even in areas where construction is increasing.

“Once you get below $750,000, your housing options start to skyrocket,” he said.

The scarce supply of affordable housing was driving more and more people to poorly connected suburbs or areas just outside the city fringe, Mr Lardner said.

FoundIt’s research found that the choice of housing at any price varied significantly between capitals:

SYDNEY

See the Sydney suburbs with the most listings under $750,000

FoundIt’s research found the entry-level market in Australia’s most expensive city was on the brink of extinction.

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After years of heady price growth, homes listed for less than $500,000 now make up just 4 percent of all city listings, a collapse from the early 2010s, when such prices were the norm.

Sydney properties priced above $2 million outnumbered those under $500,000 by a factor of four to one. Listings over $2 million also made up almost 20 percent of the Sydney market.

For those trying to break in, the reality was a brutal “distance tradeoff,” Lardner said.

The number of homes over $2 million in Sydney exceeded those under $500,000 by four to one. Photo: Gaye Gerard

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“Affordability here is paid for in commuting time, quality of housing, or both,” Mr Lardner said.

Agents revealed that the government’s First Home Guarantee Scheme has made the situation worse by creating even more demand at the lower end.

BRISBANE

See the Brisbane suburbs with the most homes under $500,000

In a shocking development, it is now harder for first home buyers to break into Brisbane than Sydney at the lowest prices.

Once considered the great escape for expensive Sydneysiders or Melbournians, Brisbane has seen its cheap stocks disappear.

Brisbane buyers will now need significantly higher budgets than just a few years ago – all at a time when their borrowing power is declining due to interest rate increases.

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The FoundIt data shows that only 3.2 per cent of homes in Greater Brisbane sold for less than $500,000 in the past year – a lower percentage than even Sydney.

Mr Lardner attributed the low supply of cheaper housing to unbridled investor demand and the inability to build enough high-density housing.

Investors, armed with spreadsheets, have “flooded the market” for years, targeting properties under $750,000 for high rental yields, effectively gobbling up the stocks intended for first-home buyers, he said.

“You get a slap in the face when you look at the numbers,” Mr. Lardner said, noting that he remembers properties costing $115,000 in areas that are now unaffordable.

MELBOURNE

See the Melbourne suburbs with the most listings under $750,000

In stark contrast to its northern neighbors, Melbourne has staked its claim as the country’s top capital for first-home buyers, largely because it made the difficult decision to go down the development path decades ago, FoundIt revealed.

Nearly half of the properties sold in Melbourne last year were priced at less than $750,000, with the city maintaining a well-functioning entry-level market thanks to the high-rise boom 20 to 30 years ago.

FoundIt analyst Kent Larnder said Melbourne is the best market in the country for first-home buyers.

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“Melbourne is the best value for first home buyers among the major capitals by a fair margin,” Mr Lardner said.

The market has been helped by an exodus of investors fleeing the city due to poor capital growth, leaving less competition for first-home buyers.

But buyers were warned that this window might close.

Mr Lardner said a “contrarian” wave of investors is starting to flow back into Melbourne, looking for value where other capital cities have reached their affordability limits.

ADELAIDE

See the Adelaide suburbs with the most listings under $500,000

Only 5.22 per cent of all sales in metropolitan Adelaide were in the sub-$500,000 price range, FoundIt revealed.

The dominant price range was $750,000 to $1 million, accounting for 35.72 percent of all sales.

It wasn’t long ago that the average home in Adelaide cost around $500,000. Now only 5 percent of the city’s inventory is priced lower.

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It was closely followed by $500,000 to $750,000, accounting for about 30.92 percent of all sales.

Those looking to buy in the $1 million to $1.25 million range could choose from 13.12 per cent of Adelaide’s listings, while 6.91 per cent of all properties were in the $1.25 million to $1.5 million range.

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