Australia's best property options under $500,000 - but don't bother looking in Sydney

Are there any decent properties that can be bought in Australia for less than half a million dollars these days?

In the face of record property prices, first home buyers, separated couples and some property investors looking to bolster a portfolio can face daunting affordability hurdles.

Buying residential property under $500,000 anywhere in Australia is mostly limited to outer metropolitan suburbs and regional areas for houses, while units or apartments do exist closer to town but will commonly be one-bedroom or studio within a greater metro area.

Property affordability in 2024 is a particular challenge, with prices of the most affordable 25 per cent of the market rising the fastest of all price quartiles, at 2.4 per cent in the three months to February.

Lowest median suburb prices by state capitals

Source: REA Group

Lending is also being squeezed, with January ABS figures showing an average owner-occupier loan fell 1.5 per cent, from $624,000 to $615,000.

The number of investor loans also fell 2.6 per cent, though still a year-on-year increase of 18.5 per cent and was the strongest over the year to January 2024 in Queensland (up 22.6 per cent), Western Australia (up 63.1 per cent) and South Australia (41.7 per cent), which by no coincidence are states with the capital city rental markets below 1 per cent vacancy.

Enter the sub-$500,000 market and though it’s slim pickings, experts say there are opportunities that might require a shift in strategy when considering what is on offer.

Buyers shouldn't try too hard to look for these properties in Sydney, where there are no more than double-digit listings in this price range.

Affordable Brisbane property markets

Brisbane suburbs where the median house price is below $500,000 are identified by REA Group in 12 Ipswich region suburbs, and Moreton Bay and Macleay Island, and for units the same, but also including Logan-Beaudesert, Acacia Ridge, Kuraby, Thorneside, and the inner-city suburb of Fortitude Valley.

Brisbane Buyers Agent Lauren Jones told API Magazine the Brisbane property market has increased so significantly in the last few years that it’s difficult to buy houses or units of quality under $500,000.

“There are some parts of Ipswich like Collingwood Park or Goodna where you can sometimes get lucky but the homes are often flood affected, in very poor condition or in a high crime area.”

“You can still secure a town home in Moreton, Logan and Ipswich councils quite affordably, but unfortunately Brisbane City Council is almost out of the question now, though some suburbs like Kallangur, Browns Plains or Marsden have this kind of property available,” Ms Jones said.

“You can still buy one-bed units in Brisbane City Council for under $500,000 in places like West End or Fortitude Valley and a two-bed unit in some middle ring suburbs, but there will be compromises such as a very small balcony, the complex in poor condition or maybe it’s on a busy road.

“It is difficult to get a rental yield over 5 per cent in Brisbane nowadays.

“The best chance for a strong gross rental yield is an inner-city unit or a duplex further out, where average yields tend to be around 3-4 per cent for A-grade investments,” Ms Jones said.

An hour down the coast, Andrew Bell, Chair, Ray White Surfers Paradise said the price bracket is virtually non-existent except for the occasional one-bed apartment or something most people “wouldn’t dare live in”.

“If you can only afford sub-$500,000 you’re going to be buying a property to live in and the properties might not be liveable, which is possibly why they haven’t sold because the person desperate enough to take it hasn’t been found yet.”

Antonia Mercorella, CEO, Real Estate Institute of Queensland (REIQ) said property prices in the Sunshine State have continued to steadily track in a northerly direction in the December 2023 quarter, but it can be frustrating and disheartening for buyers trying to enter or transition into the market.

Domain’s recent First-Home Buyer Report 2024 said Brisbane suburbs Cleveland-Stradbroke and Ipswich-Hinterland have the shortest time to save for a 20 per cent deposit on an entry-priced house of four years and one month.

“We’re still in a position where the shortage of supply is driving the market and we’re lacking the housing diversity we need for everyone in our community - the critical gap of course is at the affordable end of the market.

“Regionally, our most affordable markets are still nudging into never-before-seen territory, with Rockhampton’s housing market for example, poised to tip over the $400,000 median dwelling price mark,” Ms Mercorella said.

Perth units appeal to budget-minded buyers

Real Estate Institute of Western Australia (REIWA) data found over the year to February, the median unit price rose 3.8 per cent to $415,000, 10.7 per cent above the low of $375,000 recorded in August 2020, but still 7.8 per cent lower than the 2015 high of $450,000.

Villa median sale prices rose 10.7 per cent to $420,500 in the 12 months to February and, like median house prices, are currently at their peak following a 2020 low of $320,000.

Flats’ median price rose 10.2 per cent to $270,000, which is below a peak of $315,000 set in March 2015, but is 35 per cent higher than the low of $200,000, recorded in July 2020. 

The median sale price for townhouses increased 5.8 per cent over the past year to $592,500 and are at their peak, with a previous 2020 low of $500,000.

Home units rose 2.8 per cent to reach a median of $370,000 over the 12 months to February, still below their 2015 peak of $410,000 but 16.4 per cent above the 2019 low of $318,000.

Apartments saw no median sale price growth in the past year, with their median unchanged at $500,000. This is below their 2015 peak of $585,000 but 3.1 per cent higher than the 2021 low of $485,000.

REA Group figures found 56 suburbs in Perth where the median unit price was sub-$500,000, and includes Thornlie with  the lowest median of $401,912 and Nollamara, with at $498,583.

Just 26 suburbs were found with a median houses price of sub-$500,000, including Medina, in Perth’s south west, with the lowest median of $422,402 and Hillman also in the southwest, at the upper range of this analysis at $498,682.

REIWA CEO Cath Hart said villas have been the top performers for price growth, closely followed by flats and then townhouses and growth in the median sale price for flats reflected their affordability.

“Flats are often a great way for first home buyers to enter the market as they offer good value for investors,” Ms Hart said.

In Perth’s rental market, REIWA reports top performing suburbs are Perth, East Perth and West Perth, Rivervale and Victoria Park, where median sale prices are $437,147 and $433,257, respectively.

Perth requires the shortest time of all Australian suburbs and cities to save a 20 per cent deposit on entry-priced houses, at three years, three months, and for units, one year, 11 months in Bayswater-Bassendean (First-Home Buyer Report 2024, Domain).

Three-bedroom budget homes in regional Victoria

Matt Leonard, Principal, Buxton Bendigo, says the median house price in the regional Victorian city, two hours by road to Melbourne, is $540,000 and medium unit price, $430,000 and, he says there are investment opportunities at the $400,000-$500,000 price point.

“Purchasers can expect to buy an established three-bed residence that may require renovations on a 500-1000sqm allotment within 5km of the CBD, with scope to value add, or a unit closer to the CBD,” Mr Leonard told API Magazine.

“Investors should seek independent financial advice depending on their individual investment criteria but generally speaking, residential property closer to the CBD will attract higher capital growth in the long term, with a lower rental yield in the short term.

“Outer suburbs will generally show a higher initial return but may not achieve the same capital growth as centrally located properties.”

In terms of type of properties, investors can find a two- to three-bed house, which is 10 to 80 years-old, within two to 10 kilometres of the CBD on a 500-1000sqm block.

Units within five kilometres of the CBD on a land size of 150-300sqm are available with a gross rental yield in the vicinity of 4.5-5 per cent, he said.

Bendigo’s population is projected to increase to 155,175 by 2036 and Mr Leonard said the city typically follows capital growth patterns seen in Geelong and Ballarat.

Launceston property prices falling but still unaffordable for many

Justin Goebel, Principal, LJ Hooker, said it is difficult to find properties in that price bracket in the current Launceston market, citing just one example currently available in a semi-detached unit in the north Launceston suburb of Newnham, selling for $400,000.

The two-bed, one-bath, one hundred metre squared house on a 184-metre squared block is close to transport, shopping, amenities, takeaway outlets, the University of Tasmania, and the Australian maritime college.

Real Estate Institute of Tasmania statistics show the median house price for south Launceston, Tasmania, is $510,000 and in the lower quartile, $470,000, which is a drop of 6.8 per cent on last year.

East Launceston’s median house price is $578,000, down 37 per cent from $905,000 last year, while the lower percentile median is $536,500, down 27 per cent, from $726,250 in 2023, with median days on the market being 85 days compared to last year’s 24.

Other dwelling median prices are East Launceston, $475,000, South Launceston, $380,000, West Launceston, $440,000, and Launceston CBD, $406,500.

Higher interest rates, rising cost of living, decreasing population growth and lower consumer confidence has seen Tasmania’s real estate activity slow throughout 2023 and into this year.

Entry level property buyers’ strategy

Mr Bell said for first home buyers the property landscape can be disheartening and affordability and mortgage repayments a barrier, but he suggests ruling out buying the dream home as a first step.

“There is a growing pool of people who are tenants, and they can’t buy the place they want to buy for themselves because it’s outside their reach.

“They’ve got one of two choices: keep renting, and try to ‘out save’ the price rises, so they’ve got more money to buy what they want, or buy something on the outskirts of town, they’re not going to live in it, they can rent it out, be in the property market getting increased property values, and then maybe in five years-time sell that thing, and together with what they’ve saved, then buy what they want.

“I would encourage more tenants to not feel like they’re stuck forever because they can’t afford what they want to buy, but they could become a rentvestor,” Mr Bell said.