Days of buying a property for less than $500,000 'almost over'

You don’t need to go to the ends of the earth to find a capital city house for under $500,000, the latest data shows.

But you probably will need to go to the ends of the continent.

With two interest rate cuts already this year — and two to three more on the cards before Christmas — first home owners and investors are looking to act quickly before prices take off again.

That has many asking the question: is anything truly “affordable” anymore? And if there is, where can I find it?

According to Cotality (formerly CoreLogic), there are just 15 capital city suburbs nationwide where the median house price is $500,000 or less.

And they are overwhelmingly on the very outer limits of the capitals.

Across the country, the lowest priced quartile was the fastest growing market in terms of price gains.

Darwin — where prices are actually lower than they were a decade ago — is home to six of the suburbs, mostly on the outer northern fringe.

Just over 3,200km to the south (4,470km plus a ferry ride if you happen to be driving), Hobart is home to four.

Sydney, where the median house now $1.47 million, is, unsurprisingly, out of the question. 

So too is Perth.

The data looked at suburbs within the “greater capital cities” and so Brisbane technically makes the cut.

Russell Island and Lamb Island, both between the mainland and the southern end of North Stradbroke Island — about halfway between Brisbane and the Gold Coast — have median house prices of $461,412 and $467,088 respectively. Although commuters may want to keep hunting.

Just one municipality in the city of churches makes the cut: Playford, on Adelaide’s northern outskirts (median house price $490,750), which embraces 34 suburbs in and around Elizabeth. 

Melbourne is also represented by a single suburb: Melton, in the city’s outer north-west, sneaks in with a median of $496,950.

Under $500,000 is “really tough” — including for apartments — says Melbourne buyers’ agent Cate Bakos of Cate Bakos Property.

“It’s a really tough budget,” Ms Bakos told Australian Property Investor Magazine.

“I’m almost at the stage where I can’t take on clients with that budget.”

According to Cotality, there are 255 suburbs nationwide with a median apartment price of $500,000 or under (suburbs with fewer than 20 sales in the year are excluded).

Of those, 31 are in Greater Melbourne.

Ms Bakos says a some of these — such as the inner-city suburb of Carlton — are university suburbs dominated by “bedsits” and small studios, which banks won’t lend on.

As for other suburbs, for under $500,000, two bedrooms is out of the question, Ms Bakos said.

“There are a few areas still in Melbourne where you can buy apartments, but I won’t buy an apartment that’s less than two bedrooms,” she said.

“The banks don’t like anything under 50sqm, so I don’t want my clients falling foul of that.”

Low prices, high rental yields

In Hobart, David Zerna, Director, Timar Buyers Agency, said the city’s “sub-$500,000” houses were “extremely popular”.

“Over the last six months we’ve seen an increase in weekly rents and a decrease in vacancy rates,” he tells Australian Property Investor Magazine.

“On the ground, people are realising that it’s actually more affordable to buy a home, and the last decrease in interest rates has really cemented those thoughts.”

Gross yield on houses below $500,000 were “really strong” at just over 5 per cent, which was driving the market, including with interstate investors.

“There’s homes on the weekend that were getting seven or eight offers, half of them would be investors, that’s right across the greater Hobart area,” Mr Zerna said.

“It’s probably a 60-40 split between local investors and mainland investors.

“The inquiry to us from investors is really driven around the yield and price point entry — traditionally that has been sub-$600,000 with a 5 per cent gross yield attached to that.”

At the top-end, gross rental yields are higher still — and likewise drawing interstate buyers.

In Darwin, the gross rental yield at the end of April was 6.7 per cent according to Cotality.

The median dwelling value in Darwin, population 140,000, was $526,410 as of 30 April — 2.7 per cent lower than their last peak in May 2014.

Darwin buyers agents told Australian Property Investor Magazine the market was on the move, with healthy growth expected over the next 12-24 months, with a focus on houses.

Across the nation, experts agree: the days of buying a capital city house for less than half a million dollars are almost gone.

For would-be buyers, Ms Bakos had words of advice.

“I’d tell them to save more,” she said.

“As brutal as that sounds, there’s no point buying a property that’s not going to perform for you.”