Australia’s most affordable suburbs

Across Australia property values have risen by 12.7% to February 2010 however, there are still opportunities to purchase affordable houses if you know where to look.

We are seeing almost on a daily basis articles highlighting housing affordability issues across Australia. With strong population growth and the recent relaxing of foreign investment laws many suggest that it is becoming more difficult to get into the housing market.

Over the 12 months to February 2010 capital city property values increased by a significant 12.7% fuelled by 49 year low interest rates and the First Home Owner’s Grant Boost and a stronger and more rapid economic recovery than most would have expected. Interest rates have now been increased by 125 basis points from their 49 year low and thanks to rising prices and higher interest rates housing affordability is surely set to become more of an issue once more.

Based on median selling prices on a city-by-city basis the most affordable houses as at January 2010 were available in Hobart ($342,000) and the most expensive houses are found in Sydney ($572,000).

An appropriate benchmark for affordable capital city houses is $350,000, in most cities there are still many opportunities to purchase houses below this price. More than half of Hobart’s suburbs have a median house price below $350,000. Within Sydney, Melbourne Brisbane and Adelaide all cities have recorded that at least 20% of suburbs as having a median house price below $350,000. Outside of these regions is clearly where affordability becomes a big issue, in Perth less than 10% of suburbs have a median price below $350,000 and in Darwin and Canberra there are no suburbs which have a median house price of less than $350,000.

The results for Perth, Darwin and Canberra are certainly quite worrisome. Based on average personal income data recently released by the Australian Bureau of Statistics (ABS) a $350,000 house is 4.8 times greater than the average annual personal income in Western Australia, 5.4 times greater in Northern Territory and 4.7 times greater in the Australian Capital Territory. If the household has two incomes (remembering there are many which don’t) the differential halves.

Taking a look at the most affordable suburbs in which to buy houses throughout the national capital cities you can see that there are still affordable options available, they just tend to be further away from the city centre.

As at January 2010 Gagebrook in Hobart was the country’s most affordable capital city suburb for houses with a median price of $153,000. Logically Hobart is the city with the cheapest suburb given that the median house price over the three months to January 2010 within the city were the nation’s most affordable ($342,000).

Looking at the list Darwin house prices are generally the most expensive, only one suburb has a median house price below $400,000. Darwin has only had 39 suburbs which have recorded at least 10 sales over the last year and median prices range from $392,000 to $965,000 (Fannie Bay). The result suggests there is not a significant range in housing prices across the city. It is a similar predicament within Canberra with 84 suburbs recording results and median prices ranging from $351,000 up to $2.16 million (Forrest).

The other interesting result is the fact that many of the most affordable suburbs are concentrated within specific geographical areas. In Sydney, all of the top 5 most affordable suburbs detailed are within Blacktown and in Adelaide they are all found in Playford. In Brisbane affordable suburbs are found in the Moreton Bay Islands and Ipswich while in Melbourne it is largely Melton where these affordable houses are found.

The results suggest that there are still opportunities to purchase inexpensive properties in most cities. For those looking to purchase at the affordable end they are going to have to target specific areas and for the most part these regions are located on the outskirts of the city.

Tim Lawless is the Director of Property Research at RP Data.