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Research released by Cotality (formerly known as CoreLogic) has found the lower quartile of the housing market has led the charge in capital growth over the past 12 months amid affordability concerns, heightened demand, and serviceability constraints.
According to Cotality, this trend can be observed in every one of the nation’s capital cities.
Tim Lawless, Cotality’s research director, said in spite of economic headwinds, strong capital growth has “clustered” in city outskirts where home values are “just” in reach for home buyers.
“Households are making pragmatic decisions in response to tighter borrowing capacity and higher mortgage costs,” Lawless said.
“That’s pushed demand towards the lower quartile of the market, and it’s across the outer suburbs that this value-driven demand is translating into the strongest growth.”
All of the top 20 suburbs (annual growth) in Sydney were at least 20 kilometres from the CBD. Fairfield, Liverpool, and Blacktown LGAs dominated Sydney’s top 20 list, with 81 per cent of suburbs recording annual gains (20 kilometres from Sydney’s GPO), while only 26 per cent recorded gains within 5 kilometres.
Following a similar pattern was Melbourne. Despite wider market softness, 38 per cent of the suburbs 20 kilometres or more from Melbourne’s CBD recorded growth, with the standouts being Hume, Frankston, and Casey LGAs, while only 4 per cent of suburbs within 5 kilometres of the CBD saw dwelling value increases.
Across the midsized capitals – Brisbane, Adelaide, and Perth – value growth was even more widespread and skewed towards the outer suburbs.
Only 2 per cent of the metropolitan region in Brisbane recorded a decline in values over the past 12 months. While growth trends are widespread, values in the lower quartile of the market have risen by 14.0 per cent over the last year, compared to a more modest 4.8 per cent increase in the upper quartile.
Of the 20 suburbs with the highest annual value growth, 17 were located at least 20 kilometres from the Brisbane GPO, with more than half (11) situated within the Ipswich LGA.
In Adelaide, dwelling values have increased by 9.8 per cent over the past 12 months, with all suburbs seeing positive growth. The most significant gains have been concentrated in the lower quartile, where values rose by 15.2 per cent, while the upper quartile saw a 7.3 per cent rise.
Of the top 20 suburbs for value increases, 16 were located more than 20 kilometres from the Adelaide GPO, with the strongest growth found in the northern suburbs. Seven of the top 20 growth suburbs were in the Playford LGA and five were in Gawler LGA.
In Perth, the lower quartile of home values has experienced growth twice as large as the upper quartile, with increases of 15.4 per cent and 7.7 per cent, respectively.
Fifteen of the top 20 suburbs with the greatest value increases were situated at least 15 kilometres from the Perth GPO and only one was within 10 kilometres.
The Swan LGA, with seven suburbs in the top 20, and Mundaring LGA, with four suburbs, accounted for the majority of high-growth areas.
According to Lawless, this data has underscored a “structural shift” in buyer behaviour, due to the fact that the median home can no longer be serviced by the median income.
“In theory, a household on a median income, with a 20 per cent deposit, would need to dedicate just over half of their gross income to afford a median-priced home,” Lawless said.
“In practice, that’s pushing buyers further out, where homes remain comparatively affordable. The result is that we’re seeing outer suburban markets do much of the heavy lifting in terms of price growth.”
Lawless said that this “geographic tilt towards the fringe has implications for infrastructure, transport and planning, as populations in these areas grow rapidly off the back of housing demand.”
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