Are the rich getting richer? Not in the housing market.

Most people who have any interest in the housing market will appreciate that the performance of home values can vary broadly based on a range of factors. Geographically, for example, we have seen Darwin values rise by more than 8 percent over the first eight months of the year while Melbourne values have fallen by 2.6 percent over the same time frame.   Across the broad housing types there are differences as well, with unit markets generally showing stronger conditions compared with the detached housing market.

We are also seeing significant differences across price segments in the market with the most expensive housing markets generally underperforming compared with the more affordable markets.  Across the combined capital cities, the most expensive twenty percent of suburbs have seen values fall by -8.5 percent since the market peak compared with a -4.0 percent fall across the most affordable twenty percent of suburbs and a -4.4 percent fall across the broad middle 60 percent of suburbs.

As can be seen from the graph above, the most expensive markets have outperformed the broader capital city average during the growth phases but underperformed during the corrections.  Over the past five years the annual rate of growth across the most expensive segment of the market has been just 1.7 percent per annum compared with a growth rate of 2.9 percent per annum across the most affordably priced suburbs and 3.3 percent per annum across the broad middle priced suburbs.

The trends across the price segments aren’t uniform across all of the capital cities.  Brisbane and Adelaide are showing the opposite performance, with the more expensive price segments of the market returning a better result for dwelling values compared with the more affordable priced suburbs.  This is interesting in the sense that Adelaide and Brisbane are also the most affordable mainland capital cities to be buying in (Adelaide’s median dwelling price is $371,500 and Brisbane’s is $405,000).  The weaker performance in these markets can be linked with mortgage repayment pressures being felt across the mortgage belts of both these cities, particularly in South East Queensland where many of the most affordable suburbs in the region have shown a higher than average level of mortgage arrears.

The performance across price segments highlights why it is so important to drill down below the capital city boundaries in order to truly understand housing market conditions.  Prospective home buyers and sellers should be looking at the dynamic of the housing market from a localised perspective ensuring they are in tune with market conditions at both the macro and micro level.  There are bound to be significant differences in how markets are performing.

About Tim Lawless

Tim heads up the RP Data research and analytics team, analysing real estate markets, demographics and economic trends across Australia

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One Response to Are the rich getting richer? Not in the housing market.

  1. derrida derider September 7, 2012 at 3:00 pm #

    Everyone – rich, poor and middle – gets richer in booms and poorer in busts, and not just housing booms and busts, either. But these swings are really exaggerated at the top so inequality always rises in booms and falls in busts.

    of course the fact that a bust might only reduce the wealth of the bottom 10% by, say, a tenth while it reduces the wealth of the top 10% by, say, a quarter doesn’t mean the people at the bottom don’t feel the bust more than the people at the top. Every dollar counts more for those at the bottom – that’s what being poor means.

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