House prices: Competition tipped to be strong for affordable houses in outer suburbs despite downturn

Competition for houses in more affordable outer suburbs is expected to remain fierce, despite a broader downturn sparked by Labor’s Budget tax changes turning off investors.

Australia’s mid-point capital city house price is still slightly north of $1 million, even in the face of three interest rate rises this year and Treasurer Jim Chalmers introducing new curbs on negative gearing from July next year.

But there are still surprising pockets of affordability where an average, full-time worker earning $108,352 a year can still buy a $650,000 house, at their likely maximum borrowing capacity with a 20 per cent mortgage deposit.

More choices are possible in Adelaide, Hobart and Melbourne, but the selection is surprisingly small in Darwin and virtually non-existent in Sydney, Brisbane or Perth unless someone was in the market for a unit.

REA Group senior economic analyst Megan Lieu said first homebuyers were still likely to be interested in affordable, outer suburban houses given they are well under the price caps for the Federal Government’s 5 per cent deposit scheme.

“It’s actually going to be quite competitive in the lower end of the market,” she told The Nightly.

“Generally, there might still be strong competition in them even though the market is swinging in the opposite direction.

“A lot more people are gravitating towards the lower end of the market because that’s what they can afford and I think we will see the lower end be more resilient through the price pause compared to the higher end of the market.”

Adelaide’s north is a particularly affordable with seven suburbs having a median house price that’s conservatively attainable for the average-income earner buying on their own including Elizabeth North ($593,000), Smithfield Plains ($622,000), Elizabeth South ($618,000), Elizabeth Park ($649,000), Elizabeth Grove ($641,000), Elizabeth Downs ($643,000) and Davoren Park ($612,000), based on valuation estimates from the REA Group which owns realestate.com.au.

Even in the face of a national downturn, some of these affordable suburbs are still going up in value, with Elizabeth Park house prices growing by 3 per cent during the past three months despite Labor’s Budget discouraging investors, separate Cotality data showed.

“Adelaide has seen exceptional growth over the last few years and is actually no longer one of the most affordable capital cities but there are pockets where houses are still quite affordable,” Ms Lieu said.

Melbourne’s north-west also has six affordable suburbs including Jacana ($641,000), Dallas ($600,000), Coolaroo ($600,000), Broadmeadows ($630,000), Meadow Heights ($640,000) and in the city’s south-east, Doveton ($635,000).

Hobart’s eight affordable suburbs include Herdsman Cove ($505,000), Gagebrook ($494,000), Clarendon Vale ($551,000), Goodwood ($634,000), Chigwell ($608,000), Derwent Park ($646,000), New Norfolk ($565,000) and Bridgewater ($550,000).

Darwin is Australia’s most affordable capital city market by median price but only has three affordable suburbs including the Palmerston suburbs of Gray ($622,000), Moulden ($613,000) and Driver ($638,000).

The other capital city markets have suburbs that are attainable for an average-income earner with a bigger deposit with Belconnen in Canberra having a median price of $693,000.

Greater Brisbane’s cheapest suburb, Laidley North west of Ipswich, has a mid-point house price of $744,000.

In Perth, the most affordable suburb of Medina has a median price of $697,000, with prices in the area near Rockingham up one per cent during since May.

Greater Sydney, Australia’s most expensive market, has an entry level price point of $801,000 at San Remo on the Central Coast.

Willmot north of Mount Druitt in the city’s west has a mid-point house price of $834,000 but Warwick Farm in Sydney’s south-west has a median unit price of $470,000.