Australia’s housing market has experienced a boom like no other, with median house prices surging to all-time highs in every capital city. According to the latest quarterly house price report by Domain, Sydney is winning that race. It features an impressive median price of $1,751,728. Brisbane is not far behind with a value of $1,101,114. Melbourne is not far behind at $1,083,043, and both Adelaide and Perth undergo a huge jump, climbing up to $1,048,773 and $981,259 respectively. The report reveals that house prices are rising at their fastest pace in nearly four years, sparking concerns about affordability for potential homebuyers.
Housing Sydney continues to lay claim to the title of Australia’s most expensive real estate market. The city’s median home values have surged to over $800,000. Together with a scarce supply of homes available, this jump is evident of the increasing demand. Nicola Powell, the chief of research and economics at Domain, noted another key shift in affordability indices nationwide. The current numbers are unmistakably telling of this important change.
Over the last few months, unit prices in Brisbane have spiked. Trajectorily they are beating the rate of increase in residential property prices in pretty much every other capital – Adelaide, Perth, Darwin. Unit prices in Brisbane increased by 4.2 percent in the most recent quarter. That increase went over the median price of $700,000. Yet another indicator that buyers are ever more desirous of units located in core urban areas. Many are seeking more affordable pivots as home prices increase.
“Affordability has been reshaped. We used to look at markets like Brisbane as more affordable and we’ve now seen a change in price hierarchy.” – Nicola Powell
The downward trend despite escalating demand for housing is acute even across Queensland’s regional LGA’s. In the Central Highlands, property prices have increased by 33.3 percent in just five years. Likewise, Hinchinbrook on the Cassowary Coast has seen a rise of almost 50 percent in that same timeframe. This rapid increase in residential property values has seen 195 suburbs nationally break through the million-dollar median barrier.
Median price increases over $1 million dollars mean 38 suburbs in Sydney alone have entered the million-dollar club. The suburban local government area of Cammeraygal, in North Sydney, has turned into an overachieving superstar. Median house prices there have shot up by an astounding 29 percent, reaching an extraordinary $3.4 million.
Brisbane’s outer coastal suburbs are rapidly making up the difference. Further south in cities like Birkdale and Lota, property values are surging with yearly appreciation over 25 percent, driving median home prices above $1 million. As it turned out, Melbourne had an extraordinary quarter! Its median house price jumped by 2.2 percent, to $1.08 million—the largest increase in close to four years.
With national home prices rising at a record-breaking 46.8 percent, the squeeze on first-time homebuyers is more intense than ever. Powell pointed to a growing burden on typical families. To service the loan on a million-dollar property, a family making $106,000 would have to put more than half of their income before taxes on that property line.
“A household on the average income of $106,000 with a 20 percent deposit would need to dedicate more than 50 percent of their pre-tax earnings to service a loan on a million-dollar property.” – Nicola Powell
Several factors have fueled the explosive increase in property prices. In 2019, the Reserve Bank of Australia (RBA) undertook three rate cuts, increasing consumer confidence and propping up low levels of housing supply. What’s more, robust auction clearance rates have hit their highest level in more than two years. These joint conditions have together stoked strong house and unit price growth throughout Australia’s capitals.
“Three RBA rate cuts this year, rising consumer confidence, low levels of supply, and the strongest auction clearance rates in over two years are driving house and unit price growth across Australia’s capitals.” – Nicola Powell
All of these changes hit first-home buyers hard. Their borrowing capability is getting more and more stressed by the skyrocketing property values. Powell highlighted this as a trend that may affect buyer mindsets. No longer are potential new migrants, who traditionally tend to settle in Sydney, turning their eyes to the Harbour City instead of other cities such as Melbourne.
“Borrowing capacity is slowly diminished in the face of rising property prices, and for first home buyers, it becomes quite challenging.” – Nicola Powell
According to industry experts, moves like the new 5 percent home guarantee scheme will help drive even more activity across the market. Kaytlin Ezzy noted that this momentum could accelerate into the final quarter of the year as buyers seek better value in a competitive environment.
“With the 5 percent home guarantee scheme now underway, we expect this momentum to accelerate further into the final quarter of the year, supporting both houses and units as buyers chase better value in a competitive market.” – Kaytlin Ezzy
