Outer suburban markets surge for annual value growth
Outer suburban housing markets have outpaced their inner-city counterparts for annual price growth, following worsening affordability.
The latest research from Cotality has revealed that all of the top 20 suburbs for annual value growth in Sydney and Melbourne are located at least 20 kilometres away from both cities’ central business districts.
Cotality’s research director, Tim Lawless, said that worsening affordability metrics has led to strong capital growth in suburbs on the outskirts of cities where home prices are comparatively more affordable for 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, he added.
The company’s research showed that in Sydney, all of the top 20 suburbs for annual growth over the last 12 months are located at least 20 kilometres from Sydney’s CBD.
Notably, 81 per cent of suburbs located 20 kilometres or further from Sydney’s General Post Office registered annual gains.
In comparison, only 26 per cent of the suburbs within 5 kilometres of Sydney’s CBD recorded annual growth.
While suburbs from Fairfield dominated Sydney’s top suburbs for annual growth by accounting for six of the top 20 spots, the suburb of Austral in Liverpool registered the highest annual value growth in Sydney of 15.6 per cent to a median value of $1,008,596.
Melbourne’s market followed a similar trend to the Harbour City, with the suburb of Eumemmerring in the Casey LGA notching up the city’s highest annual growth of 6.2 per cent to a median of $592,073.
The Hume and Frankston LGAs also emerged as standout performers in Melbourne by accounting for seven and three of the city’s top suburbs for annual growth, respectively.
Cotality noted that even with the broader “market softness” in Melbourne, 38 per cent of suburbs located 20 kilometres or further from the city’s CBD recorded value growth, as opposed to the mere 4 per cent of suburbs within 5 kilometres that saw an annual rise.
Lawless said that the data reinforces the broader “structural shift” in buyer behaviour that has occurred due to the median income no longer being able to buy a median priced property.
“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.
Due to this worsening affordability in the housing market, Lawless noted that buyers are being pushed out to areas 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,” he concluded.