Australia’s Most ‘Liveable’ Suburbs Become More Affordable

Housing affordability has improved in recent months thanks to the double-digit declines in Sydney and Melbourne property prices— placing more desirable, less affordable, “liveable suburbs” temporarily within the crosshairs of would-be investors and buyers.

The brief downturn in the Australian housing market has now passed, leaving suburbs that 12 months ago would have been out of reach to many in an opportune position with the market tipped to rise dramatically once again.

According to new research by real estate agency PRDnationwide the fall in prices has now placed sought-after suburbs within the realm of pricing deemed “affordable”.

The bi-annual Affordability Hotspots report measures suburbs within 20 kilometre of each capital city’s CBD on affordability, liveability and potential to gain in value.

Suburbs are also graded as investment markets on parameters including proximity to amenities like schools, parks, while also showing below-average crime and unemployment rates.

The suburbs also have to have a below-average vacancy rate or above-average rental yield and a level of development under way that will boost property values further.

Affordable and liveable suburbs - Houses

After two years of downward pricing, tight job markets and strong population growth are now combining to drive up values across the eastern seaboard.

Low interest rates, improved sentiment, credit availability, a federal election that removed fears of higher taxes and a squeeze on supply are pushing up prices and strengthening demand.

Analysts are now predicted a 10 per cent growth in national prices over 2020 even without further interest rate cuts, driven by strong demand from buyers in the Sydney and Melbourne markets.

Property prices in the nation’s wealthiest postcodes, some of which had the largest falls during the past 12 months, are now making the biggest gains.

Recent analysis from the Reserve Bank has also revealed that more borrowers are getting a better deal on their home loans, despite banks being under fire for not passing on interest rates in full, moving away from interest-only loans.

Affordable and liveable suburbs - Units

Sydney

Median property prices in Sydney softened by -8.6 per cent for houses to $1,223,000 and by -6.4 per cent for units to $474,750 from 2018 to 2019

The proportion of liveable suburbs with a median housing price of $500,000 or less in the first three quarters rose to 0.9 per cent of the city's total – nearly double the 0.5 per cent figure of six months earlier.

Affordability in Sydney in the September quarter improved 0.8 per cent to its best position since March 2014. The price-to-income ratio also started to lift with median prices 8.4 times average earnings.

“Over the 12 months to Q2 2019, the proportion of income to meet home loan repayments decreased by 2.6 per cent in NSW,” the report said.

“Despite this, the number of first home buyers entering into the market softened by -5.9 per cent, indicating first home buyer confidence is still recovering.”

New borrowers in Sydney currently need 30.5 per cent of household income to meet mortgage repayments as of September, down 3.8 percentage points from a year earlier.

Melbourne

Housing affordability in Victoria improved over the past 12 months to, with the proportion of income to meet home loan repayments declining by 5.2 per cent.

Melbourne was found to be the city with the most affordable liveability with a median housing price of $500,000 or less in the first three quarters rising to 7.4 per cent of the city's total, up from 1.4 per cent 12 months earlier.

Suburbs such as Oak Park, Greensborough, and Greenvale north of the city's CBD recorded a median house price softening of -9.9 per cent, -7.4 per cent and -2.1 per cent respectively over the past 12 months.

The report noted that the number of first home buyers in Melbourne declined by -5.7 per cent during the same time frame.

“Approximately $28.1 billion worth of developments are planned for the 2nd half of 2019, which will lead to economic and employment growth, while residential development may lead to an oversupply and thus further softening in prices,” the report said.

“This creates a conducive environment for first home buyers to enter the market.”