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How To Understand The Residential Property Market Shift
Property Sales by Price Point with Cameron Kusher – rpdata.com Snr. Research analyst
A good way to determine the shift in the residential property market is looking at the prices at which properties are transacting. Looking at real estate sales volumes across broad price ranges highlights the change in market performance over time and clearly shows how the residential market has performed over recent times.
The last time Australian capital city property values reached their recent low was during December 2008. Between December 2008 and July 2010, capital city property values have increased by a total of 17.4 per cent with house values up 16.7 per cent and units increasing by 19.5 per cent. The superior performance of the unit market over this period is due to two factors:
1. affordability pressures which make it difficult for buyer to purchase the houses they desire
2. the active first time buyer market through much of 2009, many of whom rented in inner city areas and were not prepared to give up the benefits of such a location that would be necessary to buy a house, as a result they targeted inner city units.
Despite this strong level of growth, it has not been homogenous with vales up by as much as 26.1 per cent over the period in Melbourne however, Brisbane has been the laggard with values up just 7.3 per cent.
Importantly, regional areas of the country have fared nowhere near as strongly as the capital city markets. Whilst capital city house values have increased by 16.7 per cent since the beginning of 2009, regional house values have increased by 8.7 per cent (almost half the level of growth recorded across the combined capital cities).
It is also interesting to take a look at the shift in the market with respect to the prices at which properties are selling. The analysis I am about to detail looks at property sales during the last quarter of 2008, when property values were at their recent low point and during the second quarter of this year.
All capital cities have recorded a clear market shift since the time the market was at its lowest point (the last quarter of 2008) to the most recent quarter.
For this analysis we have broken the market into five segments:
• Below $300,000
• $300,000 to $500,000
• $500,000 to $700,000
• $700,000 to $1 million
• $1 million plus
During the final quarter of 2008 the greatest proportion of sales across the capital cities was occurring for properties priced between $300,000 and $500,000 and this is still the case during the most recent quarter. However, the proportion of sales in this range has fallen from 47.7 per cent of all sales to 42.6 per cent.
The proportion of sales occurring at prices below $300,000 has seen the greatest decline during the period. At the end of 2008, 24.5 per cent of all capital city dwelling sales during the quarter were at prices below $300,000, over the last quarter just 13.0 per cent of sales were below $300,000.
At the end of 2008, 72.2 per cent of all capital city dwelling sales were at prices under $500,000, over the last quarter only 55.7 per cent of sales were below $500,000. With the proportion of sales below $500,000 declining so significantly, the three price points above $500,000 have all recorded a large boost in the proportion of sales.
The $500,000 to $700,000 price point has recorded an increase in sales from 15.6 per cent to 22.9 per cent. The volume of property sales priced from $700,000 to $1 million has increased from 7.2 per cent of all sales to 12.8 per cent and sales over $1 million accounted for 8.6 per cent of all capital cities over the last quarter compared to 5.0 per cent at the end of 2008.
Within Sydney, less than half of all sales during the last quarter were for properties priced below $500,000. Over the quarter, 47.5 per cent of all dwellings sold were priced below $500,000, compared to 65.0 per cent in the last quarter of 2008. This result highlights just how difficult it is to enter the Sydney housing market and again signals why the more affordable unit product has recorded stronger levels of property value growth.
In each other city, property sales under $500,000 have accounted for the majority of sales, ranging from 53.8 per cent in Perth and Canberra to 85.2 per cent of sales in Hobart.
Another interesting result to note is that despite so much of the media’s attention being focused on the premium market, outside of Sydney, Melbourne and Perth it accounts for such a small portion of sales.In these three cities the volume of sales of properties priced $700,000 and over was greater than 20 per cent of all sales during the last quarter. The next best performer during the quarter was Canberra where sales in excess of $700,000 accounted for just 13.9 per cent of the market.
The shift in the market is clearly reflective of the increase in the cost of housing since the end of 2008 rather than a lack of demand for the more affordable properties. One could argue with the population continuing to grow, particularly within capital cities that demand for affordable properties is growing at a time when the supply of these properties is well and truly easing due to growth in property values. The problem being that the Federal Government is responsible for population growth yet a combination of state and local governments are responsible for zoning and approvals.
If we (and the Government’s we elect to represent us) are really serious about housing affordability and importantly supplying these properties with the facilities and jobs to make them attractive to buyers, there needs to be a coming together and consensus surrounding a strategy from all three levels of Government.Realistically, it looks very unlikely the situation will change.Subsequently, affordable property will continue to be harder to find and will only be found further away from the centre of the capital city in areas lacking in wanted infrastructure, amenities and employment drivers.
For more information about current real estate values and property prices, please visit the myrp.com.au website.
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