Do more expensive suburbs have the biggest house price increases?September 30 2019
Have blue-chip suburbs increased in price by more than less expensive suburbs in Australia’s capital cities over the past five years? Or has house and unit price growth in cheaper areas exceeded price growth in expensive suburbs?
Our analysis finds there is not a one-size-fits-all answer across each capital city. Within cities, price trends differ between expensive and more affordable suburbs. This highlights that the Australian property market is made up of distinct markets, each with its own characteristics.
The key findings are that in Perth and Adelaide, expensive suburbs have generally seen stronger price growth over the past five years. But in Melbourne, less expensive suburbs have increased in price the most. In Sydney, median prices in very cheap and very expensive suburbs have risen the most since 2014. While in south-east Queensland there’s no clear relationship.
Price trends also diverge across Australia’s capital cities, with each market going through significant changes over the past five years. In Sydney and Melbourne, the biggest property price correction since the 1980s followed the 2012 to 2017 price boom. Brisbane and Canberra house prices rose over the 2014 to 2018 period before modest price falls over the past year. In contrast, Perth property prices peaked in 2014 and have been falling since then.
Analysis: suburb price changes over the 2014 to 2019 period
In the analysis below, we look at the relationship between suburb median house and unit prices in 2014 and suburb price growth over the following five years in Australia’s major capital cities.
In the Sydney market, the cheapest suburbs and many of the most expensive suburbs have seen larger house price rises than mid-priced suburbs (see graph below). For example, Budgewoi, a suburb on the Central Coast, which had a median house price of $312,000 in 2014, saw prices grow by 60 per cent over the next five years. Some of Sydney’s less expensive suburbs may have seen big price rises as buyers searched for affordable housing on the city’s fringe as prices skyrocketed across Sydney over the 2012-2017 period.
At the other end of the scale, Vaucluse house prices increased 77 per cent from the 2014 median of $3.39 million. Mosman also saw strong growth of 54 per cent since 2014 (from the 2014 median of $2.4 million). These price rises are well above the typical price increase of 30 to 40 per cent.
Over the whole range of Sydney suburbs, there is no apparent relationship between the median house or unit price at a suburb level in 2014 and price growth over the next five years.
Around Sydney’s 2014 median house price of $840,000, there was a wide range of price growth in the following five years. For example, Penshurst’s median house price increased by 19 per cent, whereas Carlingford prices jumped by 46 per cent.
It was a similar story for units in Sydney’s suburbs.
There’s a clear pattern across Melbourne’s suburbs. Cheaper suburbs have typically seen stronger house price growth over the past five years than expensive suburbs. For example, Toorak house prices rose only 10 per cent from the 2014 median house price of $2.560 million. In contrast, Melton South had a median price of only $240,000 in 2014, but this jumped 71 per cent over the next five years.
Even though the relationship between the median house price in 2014 and price growth in the next five years was quite strong, there are outliers. Hampton had a median price of $1.150 million in 2014 and rose 57 per cent over five years. Bundoora had a median house price of $550,000 in 2014 and prices increased by 26 per cent.
The relationship is strongest for houses, but there is also a downward-sloping relationship for units, with suburbs that had a low median unit price typically seeing more significant price rises over the past five years. Frankston’s median unit price jumped 34 per cent from $285,000, while Port Melbourne unit prices fell 1 per cent from the 2014 median price of $720,000.
The pattern in the above graph highlights the characteristic that Melbourne’s expensive suburbs tend to lead Melbourne’s property market cycle. The top end of the Melbourne market started falling first after the 2012 to 2017 price boom. This likely contributed to Melbourne’s expensive suburbs generally having smaller price rises from 2014 to 2019. The downward-sloping relationship between suburb median price and price growth does not exist over the 2009 to 2014 period.
In south-east Queensland, expensive suburbs typically haven’t outperformed lower-priced suburbs. There is a slight positive relationship between median house price in 2014 and price growth over the next five years, and close to no relationship for units. The graph below shows all suburbs in south-east Queensland, but the pattern is very similar for Brisbane suburbs only.
Although there is no obvious pattern, there are some high-priced suburbs that have seen minimal price growth and some cheap suburbs where prices have increased a lot and vice versa. Mermaid Beach on the Gold Coast saw significant five-year price growth of 64 per cent from the median house price of $885,000 in 2014. At the other end of the scale, Newport in Brisbane’s north fell 11 per cent from the 2014 median price of $805,000.
For units, Noosa Heads is the main outlier, with the median unit price of $460,000 in 2014 jumping 80 per cent over the next five years.
The 2014 to 2019 suburb price and price growth relationship for south-east Queensland is similar for the 2009 to 2014 period.
Perth and Adelaide
Perth’s more expensive suburbs generally held up better during Perth’s downturn, in which the median house price fell 14 per cent since 2014. Suburbs where the median house price has grown, or just remained steady, have bucked Perth’s general downward trend. The suburb with the biggest price increase was the beachside suburb of Cottesloe, which had a median house price of $1.750 million in 2014 and then saw price growth of 26 per cent over the next five years (see graph below).
Perth’s less expensive suburbs, which are mostly on the city’s outskirts, have generally seen the largest price falls. These areas have been hit hard by the mining downturn and typically have higher levels of unemployment (for example, Mandurah’s unemployment rate was 16 per cent at the start of 2019). The slowing economy after the mining boom has meant many people are behind on their mortgage repayments and has also left many households in negative equity.
In contrast to recent years, over 2009 to 2014, when the Perth market was much stronger due to the mining boom, Perth’s cheap suburbs generally saw stronger price growth than expensive suburbs.
Adelaide’s higher-priced suburbs have seen more significant price rises than less expensive suburbs, which have typically seen smaller price increases. This relationship was also apparent over the 2009 to 2014 period.
North Adelaide’s median price was $760,000 in 2014 and has increased by 26 per cent over the past five years. In contrast, Hackham’s median house price was $265,000 and has grown by 9 per cent over the past five years. There are some outliers, such as Norwood, where the median house price of $710,000 in 2014 increased by only 2 per cent in the following five years.
Wiltshire, T. (2019, September 19). Do more expensive suburbs have the biggest house price increases? Retrieved from https://www.domain.com.au/research/have-pricier-suburbs-seen-bigger-price-rises-than-cheaper-suburbs-881115/