Nicola Powell, the Chief Data Scientist at Domain, tells us which suburbs in Australia are the most and least affordable
Introduction – Australia’s most affordable suburbs
Ross Greenwood: Welcome back to Work.Life.Money right around Australia. It’s great to have your company.
Tell you one thing that clearly is an issue right now, in the past, and in the future. It’s going to be where do you leave as you go through your working life, and ultimately, in retirement. The second part about this, as you know is that State Government, and also the Federal Government have done enormous amounts to try and improve housing affordability for first-time buyers.
But there is one fundamental issue that still remains true. That housing is a market. Sometimes it will be more affordable than other times. At some stages, your wages might do better, and so they thought your affordability might also be better. Quite clearly, when interest rates are lower, affordability is improved.
The other side of this is also where you want to buy. One of the fundamental issues of housing affordability is choosing where you can afford to buy. I think that’s pretty key. Now, in capital cities right now, depending on where you are, affordability is rather up or down. In Perth, more affordable. In Darwin, more affordable. In Hobart, more affordable. In Sydney? Not so much.
Let’s now go and have a chat with somebody who studied this to try and figure out which are the most affordable suburbs in Australia. Domain Group’s Chief Data Scientist is Dr. Nicola Powell who’s on the line right now. Many thanks for your time Nicola.
Interview – Dr Nicola Powell, Domain Group
Nicola Powell: Hello.
Ross Greenwood: This is a great subject. People love this. Just based on looking over other people’s backyards to figure out where it might be cheaper or more expensive. The big issue here is a lot of people are being driven out of big capital cities because there’s a lack of affordability close to these cities. But the farther out you get, you’re ultimately market more affordable house and land packages and something like that. Certainly, that’s true of Sydney and Melbourne in particular.
Nicola Powell: Yes, that is totally correct. All of the capital cities, obviously, perform very differently because it reflects how their actual market are actually performing. For Sydney and for Greater Melbourne, both of those, you have to go to those urban fringes really just fine. Those are affordable. The affordable price points of first-time buyers to actually access the market.
When you look at Sydney, in particular, it was dominated by the Central Coast which on a good day is probably an hour into the CBD, probably more.
Ross Greenwood: That is on a good day> That’s the interesting side. Just explain, how you try to come up with this concept of affordable suburbs because you had to find some cut-off of affordability to sort of get them in the system at is where. It was different from each capital city, wasn’t it?
Nicola Powell: Yes, that is absolutely true. What we actually did was housing finance data was actually released by Australian Bureau of Statistics. That obviously differs for each state and territory. We took that figure. We took an average of the 12 months. We added in the relevance first homeowner grant in each of states and territories. We also factored in 20% deposit.
Got a highlight here, we put 20% in. That’s best case scenario because what we are finding at the moment is the struggle for people to actually save that lump sum deposit because of that low wages grow.
Then what we did, we then complemented it with our data that we’ve got on houses, empty units, and we highlighted in each state and territory based on that cut-off point, the off set for that housing finance data, and highlighted the suburbs that fall within that price range.
Ross Greenwood: You can get the full survey on domain.com.au, but let’s just take you through the major capital cities that we cover here on Work.Life.Money, and let you know where it sits. We’ll start with the most the most expensive — If you like to see the — in Australia, which is Sydney. I’ll tell you what, you’ll be surprised by how far you’ve actually going to travel to try, and get these affordable prices. What did you find?
Nicola Powell: Yes, I mean it was dominated by the Central Coast. Both the house and units. And obviously, when you start looking at unit, it brings in — You’re slightly to the CBD a little bit more. It terms of where that was out, it was actually towards Canterbury and Bankstown in terms to those affordable areas–
Ross Greenwood: Let’s go to top three, shall we set? Gosford was number one. Median house price, $412,500, but the problem of Gosford for anybody who knows it, is it’s 65 km from the CBD. That’s one thing. Unless you’ve got work there, it’s pretty tough. The next one was San Remo, actually further away, $415,000, 99 km away. And Charmhaven Central Coast $430,000, 96 km. away from the CBD. Unless the transport links are exceptional, it’s pretty hard to try and commute that distance every day.
Nicola Powell: Absolutely, of course, it is. When it comes to affordability which is the thing we need to have a bit of a holistic approach towards it. It is about providing affordable housing, but it’s providing diverse housing as well scattered across the city. And with that, you need great infrastructures as well because commuting is a big part of everybody’s lives. If you’re working in the CBD and living on the Central Coast. That’s a huge commute that you have to do everyday.
Ross Greenwood: All right, let’s go to Greater Melbourne now because, again, the commutes are pretty significant, but the prices are cheaper. What do you find in the top three?
Nicola Powell: Yes, top three for houses in Melbourne were–
Ross Greenwood: Mulgrave was one, I know that’s on the outer east about 70 km. away, $295,000. Then came Melton South and Melton both 44 km, 41 km away from town, and both of them sitting around $300,000. It is more affordable for people who want to get into those suburbs. But again, you’ve either got to have work or you’ve got to have n ability to live in that nice places, don’t you?
Nicola Powell: Absolutely, and what we found with Greater Melbourne is it was really dominated by the West of Melbourne. West of Melbourne is going through a really interesting development. The government have actually allocated a 100,000 re-zoning of housing blocks. But in particular, in that western part of Melbourne is they have ear marked 17 new suburbs to be developed. What comes with that and what should come with that is great infrastructure.
I think the suburbs that are already there are experiencing the benefit from that improved infrastructure and the future development. It’s going to be a massive growth corridor for that Greater Melbourne region.
Ross Greenwood: Okay, let’s now go to Greater Brisbane. There’s Brendale in Brisbane’s North 20 km away, so we’re getting closer $259,750. Gailes which is Brisbane’s West 24 km, $275,000. Then Laidley, also on the west 80 km away, $280,000. So it again, just shows you got to be able to commute if you’re going to live in these affordable suburbs.
Nicola Powell: I think it goes back to what do we see as a first home, you obviously have to go a little bit further out. But overall, the Greater Brisbane market has been a great place for first-time buyers accessing the market. It had the second highest participation rate over last year in terms of first-time buyers accessing that market. It’s been boosted by a $20,000 first-time owner growth which was boosted up from a $15,000.
But I really think there’s some things there that really help activate the market and also, of course, restrain unit prices tumbling because of that copious amounts of stocks that we’re seeing in the market in that Brisbane market. These are all great things for first-time buyers because obviously, these falling pooling prices, it brings that entry-level prices point down.
Ross Greenwood: Let’s go to Greater Perth now because the three suburbs that stand out there. Medina in the South West $250,000, 39 km away. Armadale in the South East 30km away, $299,000, and in the South West, it’s Hillman 44 km away, $294,000. The one that I would say that stands out to me was Lockridge in the East 14 km away from the CBD, $337,000. Perth is obviously more affordable.
Final one I’ll take you to, and this is where you can get closer to the city, East Canberra. Hawker in Belconnen 11 km away, $277,500. Hackett in Canberra Central 6 km away, $286,500, and Hughes in the Woden Valley is 9 km away, $318,000. In both of these cases, you can get a little bit closer to the city. Get more bang for your buck as it were.
Nicola Powell: Yes, absolutely, but this thing with Canberra. There wasn’t a single suburb that fell within the price range for a detached housed for a first-time buyer. It was only unit three that were in the price point for a first-time buyer in that particular market. So really, our price out for detached housing market which is really seen with strong prices growth in the ACT region.
Ross Greenwood: Tell you what, great to have you on the program, and then explanation just a few of those ideas. Remember, go to domain.com.au. You can check that full report. Nichola Powell is the Chief Data Scientist for The Domain Group.
Nicola Powell: Thank you.