PRD → Research Hub → Affordable & Liveable Property Guide 2nd Half 2018

Affordable & Liveable Property Guide 2nd Half 2018

The PRD Affordable and Liveable Property Guides 2nd Half 2018 have just been released for Sydney, Melbourne, Brisbane, and Hobart. The reports provide valuable insight and highlights for the market, reporting on many key indicators, creating a holistic picture of property conditions in each capital city.

December 3 2018

Affordable & Liveable Property Guide 2nd Half 2018

Surprises are in store for Affordable and Liveable property!

The PRD Affordable and Liveable Property Guides 2^nd Half 2018 have just been released for Sydney, Melbourne, Brisbane, and Hobart. The reports provide valuable insight and highlights for the market, reporting on many key indicators, creating a holistic picture of property conditions in each capital city.

There were several surprises in the 2^nd half of 2018 report, including:

All affordable and liveable suburbs were in the north of Brisbane. This was different to previous reports, where affordable and liveable house hotspots were found in all pockets of Brisbane (i.e. north, south, east, etc.).
For the first time since 2015 all the affordable and liveable suburbs in Sydney had negative annual median price growth, a sign of market cooling. Prior to this, affordable and liveable suburbs showcased positive growth, thus, in this report it became a task of nominating suburbs with as moderate a softening as possible.
None of the affordable suburbs in Hobart were able to satisfy the liveability criteria. To ensure liveability aspects were met, the median suburb price had to be raised above that of the Hobart metro median price. This only occurred in Hobart, which suggests the strong need to develop a strategy that addresses liveability aspects in more affordable areas of Hobart.
For the first time since 2016 the first and lowest price band of $0-$500,000 has opened to Sydney buyers, at 1.4% of the market. Although this is a very marginal part of the market, this marks a more affordable Sydney.
Of all the capital cities, Melbourne has proven to be the most resilient market, both in terms of price growth (in comparison to Sydney) and in ease of satisfying liveability aspects in its more affordable suburbs.

Affordable & Liveable Suburbs

Table 1 Illustrates liveability costs between the capital cities, with Hobart proving to have the highest average liveability cost at 12%, and Sydney and Brisbane taking out the title for most liveable cities with an average liveability cost of 3%.

Table 1. Affordability vs Liveability It is important to note that these premium percentages are affected by median price movements in the market, and that unit markets in Sydney, Melbourne, and Brisbane have experienced an annual softening. If only based on house premium percentage, Melbourne becomes the most expensive city to live in, followed by Hobart. This is quite surprising as for several years Melbourne has been nominated as one of the most liveable cities in the world.

First home buyer activity continues to be a focal point in the 2018 property market. Table 2 confirms declining affordability over the past 12 months, particularly in Melbourne and Hobart, with drastic reductions in access to the first and lowest price band within each market. In Melbourne, access to the under $500K market shrunk significantly from 11.2% to 1.4%, whereas in Hobart access to the under $350K market declined from 28.6% to 8.2% in the 1^st half of 2018.

Interestingly, Brisbane and Sydney have come out as the beacons of hope for those looking for affordability, with access to the less than $500K price bracket increasing. For Brisbane this increased from 10.6% in the 2^nd half of 2017 to 12.4% in the 2^nd half of 2018. The 2^nd half of 2018 marks a momentous occasion for Sydney, as for the first time since 2016 buyers will be able to access the less than $500K market, albeit at the smallest percentage across capital cities at 1.4%.

The premium market, above the $2M price tag, has decreased in sales activity in Brisbane Sydney and Melbourne, with the price bracket completely vanishing in Brisbane. Interestingly the highest premium market for Hobart, $800K+, has tripled from 3.6% to 10.2% over the past 12 months. This suggests that there may be a concentrated shift in buyer activities across capital cities, creating more affordability in Brisbane, Sydney and Melbourne, and causing price hikes in Hobart. Although this has been an occurring pattern over the past 12 months now we are seeing the definite results of this activity. Hobart is the only capital city in which the percentage premium added to its affordable and liveable suburbs had to be above what was added to reach the Hobart median price, thus, now is the time to strategically re-think development in Hobart and its surrounding areas. Table 2. Accessible Suburbs by Price Range

The PRD Affordable and Liveable Property Guides 2^nd Half 2018 aim to identify affordable and liveable suburbs within 20km from each capital city’s CBD.

Considering all methodology criteria (property trends, investment potential, affordability, project development, and liveability factors), Table 3 identifies key suburbs that property watchers should look out for. Table 3. Affordable and Liveable Hotspot Suburbs

Table 3 highlights in general that Sydney has the highest entry price yet the lowest rental yield. In saying that, the Sydney house rental yield is comparable to that of Melbourne, potentially due to a softening in Sydney median house prices. This is good news for investors, given the past 24 months house rental yields in Sydney have been one of the lowest across all capital cities.

In the 1^st half of 2018 Hobart provided the lowest entry price with the highest rental yield; however, this is no longer the case. Whilst it might be true for houses, both Brisbane and Hobart compete for the title of most affordable, with the highest rental yield for units. This is due to the softening in the Brisbane unit market, as well as the upswing in the Hobart unit market.

Methodology

Each PRD Affordable and Liveable Property Guide focuses on suburbs within a 20km radius of the CBD, taking into consideration the following factors:
Property trends – all suburbs considered will have a minimum of 20 transactions for statistical reliability purposes, with positive price growth from 2017 to 2018.
Investment – as of June 2018 the suburb will have an on-par or higher rental yield than Melbourne Metro, and an on-par or lower vacancy rate.
Affordability – suburbs with a median price below the maximum sale price of state average home loan plus allocated premium percentage. The premium percentage added for a hotspot suburb must be below the premium percentage added to purchase the relevant capital city median price.
Project development – the suburb has a high total estimated value of project development for the 2^nd half of 2018. This ensures sustainable economic growth, having a positive effect on the property market.
Liveability factors – this includes ensuring low crime rate, availability of amenities within a 5km radius (i.e. schools, green space, public transport, shopping centres, and health care facilities), and an unemployment rate on par or lower in comparison to the state average (as determined by the Department of Jobs and Small Business, June Quarter 2018 release).