Where can you buy a house or unit under $400,000 across the capital cities and major regional markets?

The issue of housing affordability always strikes a nerve here in Australia, and there is no doubt that homes across Australia’s largest capital cities are expensive by international standards.  There are plenty of studies around that aim to investigate how affordable or unaffordable Australian housing is, however I found the recent Reserve Bank of Australia article (pages 13 to 22 in the December quarter RBA Bulletin) on housing affordability to be one of the most informative studies (http://www.rba.gov.au/publications/bulletin/2012/dec/pdf/bu-1212.pdf).  The RBA point out some of the differences in methods for calculating housing affordability, particularly around the house price to income ratio and why results can be significantly and fundamentally different depending on what data and figures are being used.

For example, on the housing side of the equation, using an ‘average’ (mean) price rather than a ‘median’ will result in a higher estimate of housing prices; so too will focussing on just capital cities rather than all of Australia.  Another factor is whether the analysis is based solely on ‘house’ prices rather than ‘dwelling’ prices which include attached and semi-attached homes.

On the income side of the equation, it really depends on where the income data is being sourced from, with the typical options being either survey’s such as the Census or from the national accounts data, both of which are sourced from the Australian Bureau of Statistics.  Survey data typically only includes cash income such as salaries and wages, while the national accounts income data includes additional income sources such as superannuation payments.

The difference between using medians and averages is clearly demonstrated in the below graph which show the dwelling price to income ratio to be around 4.1 times based on averages and about 6.6 times using medians.

On the topic of housing affordability, and in line with an ABC World News discussion I was involved with today, I thought it would be interesting to update our analysis about where to find Australia’s most affordable housing.

Across the capital cities and based on all sales recorded over the 2012 calendar year, 31% of house sales and  46% of unit sales were transacted at a price below $400,000.  Aggregating the figures together for dwellings shows that about 34% of all capital city homes sold for less than $400,000 over 2012.  As you can see in the table below though, the largest proportion of these sales was in Hobart where 67.6% of all house sales and 82.5% of all unit sales were priced under $400,000.  Similarly, Adelaide recorded 49.7% of all house sales and 70.7% of all unit sales with a sale price lower than $400,000.  Maybe not so coincidentally, not only are these Australia’s most affordable capital cities, but Tasmania and South Australia are also showing the highest rates of unemployment.

At the other end of the spectrum is Canberra where only 8.6% of house sales were priced lower than $400,000.  Detached house sales under $400,000 were also comparatively rare in Darwin (23.0%) and Sydney (24.7%).

The city with the largest premium (ie $2 million plus) is Sydney where 3.0% of all house sales were priced at $2 million or higher and just shy of 1% of Sydney units were at this price or higher.

Outside of the capital cities, housing prices are typically much lower.  Take Newcastle, one of Australia’s largest regional cities, as a case in point.  The median house price at Newcastle is $395,000 compared to Sydney’s $660,000 and the median unit price is $340,000 compared to $489,000 in Sydney.  51% of houses sold over the past year were at price points below $400,000 and 68% of unit sales were priced lower than $400,000.

As far as housing affordability goes, the vast majority of regional cities provide a substantial saving on the cost of housing compared to the capital cities.  The drawback to many of these areas though is that job opportunities are often scarce.  If we saw more Government and private sector businesses choosing to locate their headquarters in regional locations, the labour market conditions would an improve and it would be easier to attract new residents.

The tables below provide a comparison point against the capital city data for key regional markets around the country: 

The series of thematic maps below provide some geographic context to the above table.  Areas shaded in the red have recorded at least 80% of house or unit sales at a price below $400,000 over the 2012 calendar year.  The concentric circles mark the 10km, 20km and 50km points from the capital city GPO.  The white space on the maps is typically areas where the number house or unit sales are either very low or non-existent.

The spatial trends are pretty clear and should come as no surprise.  The vast majority of affordable sales are generally located in the outer fringes, with very few suburbs showing a high proportion of house sales lower than $400,000 within 20km of the city.  This trend is particularly the case in the larger capitals, although there are a few exceptions.  The proportion of unit sales priced under the $400,000 mark show an improvement in proximity, demonstrating the more affordable price points that medium and high density housing options provide.



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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