A new report by property consultants Herron Todd White reveals that over a third of the homes in Australia have crossed the million dollar threshold. This is perhaps the biggest change in the housing market. Statistics from Cotality shine light on a powerful movement in large urban areas such as Sydney. Here, two-thirds of homes have inched over the million-dollar threshold. With such high property prices across the greater region, the report emphasizes the negative impact this has on homeownership and affordability especially for younger generations.
Yet, during all this time, housing prices continued to increase. Land costs are the major obstacle, experts stress, but addressing land costs could be the key to turning this tide. Cameron Kusher, a leading analyst in the field, suggests that reducing land costs would alleviate some pressure on home prices. At the other end of the scale, Darwin has the smallest share of homes worth more than a million dollars. Yet it has barely nudged up from 1.0% in 2015 to 1.3% today.
Residential property holdings in Australia have reached a staggering $10.6 trillion. About 70% of that jaw-dropping value is wrapped up in land. This concentration fuels worries about the ongoing viability of the current housing market status quo. It illustrates the mounting barriers facing would-be homebuyers.
The Million-Dollar Threshold
This is borne out by recent data which shows that almost 42% of detached homes in our capital cities are now million-dollar-plus homes. This is a huge increase from only 14% ten years ago. Regionally, we are close to one in five homes having exceeded this threshold, up from less than 0.5% a decade ago. That sudden increase is representative of nationwide trends in housing demand and housing supply.
In Sydney, the situation is particularly striking. The median home value for five-bedroom houses recently topped $2 million. This steep jump is a reflection of just how rapidly the housing market has changed since 2015, when these homes typically cost about $1 million. PRI’s Eliza Owen, one of the world’s foremost property market analysts, shares a great insight. She continues, “This data shows the widening affordability gap between detached houses and more medium to higher density housing.”
Mr. Kusher further adds that “only houses with five or more bedrooms had a median value over $1 million in Greater Sydney a decade ago.” This dramatic change underscores the extent to which the market has at least temporarily turned in favor of high-value properties.
Regional Variations
Even as Sydney leads the world with their nosebleed-worthy property appreciation, cities such as Melbourne are seeing massive increases. Over 30% of residences in Melbourne currently hit the million-dollar threshold. That’s a decrease from their peak of 33.1% earlier this year, but still well above the 12.4% a decade ago.
In Hobart, the proportion of dwellings valued above $1 million has fallen sharply. It reached its highest levels at roughly 20% in March of 2022, but has dropped since then. This fluctuation indicates that while some areas are seeing consistent growth in high-value properties, others may be stabilizing or even retracting from these figures.
Darwin’s real estate market remains solid and consistent. Unlike its bigger-metro counterparts, it boasts less than one percent of homes priced at a million dollars or more. The current share of such homes—which has only marginally increased since 2015—indicates a high local market idiosyncrasy.
The Future of Homeownership
The increasing difficulty of affording a home today not only affects young adults who wish to buy their first home, but minority and low-income families as well. As Mr. Kusher points out, “realistically [younger people] have very little chance of making that a reality if they have to buy a house given how much prices have escalated in recent decades.”
Factors like high interest rates and a limited labor market further complicate the challenges tied to homeownership. Ms. Owen notes that “a combination of rapidly rising interest rates, weak population growth trends and relatively weak jobs growth may have contributed to sustained home value declines across the city.”
The changing landscape suggests a shift from viewing homeownership as a means of wealth accumulation to a necessity for basic shelter. Mr. Kusher emphasizes this changing perspective: “away from one in which you build wealth from buying and holding residential property to one in which it is seen as essential shelter.”
