Median property values might not be the best point of pricing reference for investors on tighter budgets who are looking to get into the market.
In a CoreLogic property pulse update, head of research Tim Lawless has highlighted how buyers on a tight budget might find it more practical to narrow down their property search by examining lower quartile values.
The lower quartile – or the most affordable 25 per cent of properties in a region – would provide a better view of the market entry point.
In contrast, the upper quartile – or most expensive 25 per cent of properties – can give investors an indication of premium values.
Taking this into account, Mr Lawless said some areas that might seem out of budget based on the median value “may actually offer up some opportunities if buyers are willing to target properties at the lower end of the value range”.
According to the researcher, the same can be said for anyone looking to tap into a “highly desirable region”.
“This might mean looking for the worst house in the best street, buying a home on a smaller block of land, or choosing a property that needs some work”.
So how does examination of the lower quartile change property affordability figures across Australia’s capital cities?
The largest capital city has a median house value of $994,300.
In contrast, the lower quartile house value sits almost $300,000 lower – at $697,370.
Mr Lawless flagged that in some cases, such as the North Sydney and Hornsby sub-region or the Eastern Suburbs, the difference between the median and lower quartile can be more than half a million dollars.
Three sub-regions even have a lower quartile house value below $600,000: The Central Coast ($525,590), Outer South West ($564,730) and Outer West and Blue Mountains ($575,890).
The second largest capital city has a citywide median house value of $798,670.
When looking to the lower quartile, this figure drops $184,300 to $614,330.
According to the researcher, this has provided an “easier entry point for budget-constrained buyers”.
Three regions have a lower quartile house value that is below $600,000: North West ($549,790), South East ($573,590) andPeninsula ($580,130).
The city of churches boasts the second lowest lower quartile price point across all capital cities.
Sitting at $366,220, Mr Lawless indicated that by targeting lower quartile properties, buyers can spend around $108,000 less than the median.
Even the city’s most expensive sub-region – Central and Hills – has recorded a lower quartile value below $600,000.
A stabilisation in property values after five-and-a-half year downturn means housing values are among the most affordable of all capital cities, according to the researcher.
Lower quartile house values sit at a reported $358,790.
This is just under $100,000 than the median ($98,000).
According to analysis, every sub-region of Perth shows a lower quartile value under $400,000, except for the Inner sub-region, where the lower quartile value is up at $906,900 – more than double any other sub-region.
Housing affordability is more challenging in Tasmania, due to a substantial rise in housing values over a five-year period, Mr Lawless observed.
In saying that, buying a home in the lower quartile range – at $394,850 – could save a buyer $118,000 compared with buying at median value.
In decline since mid-2014, Mr Lawless has reported “a substantial improvement to housing affordability”.
Tracking at $388,720 for the lowest quartile, this could save buyers around $118,000 compared with median prices.
Behind Sydney and Melbourne, CoreLogic reported that the lower quartile house value for the Australian capital is the third highest.
At $586,580, Mr Lawless reported the lower quartile value as approximately $115,000 lower than the median house value.