Buyers eye medium density dwellings as houses fall further out of reach

Domain’s Matching Demand report, which compared buyer searches and property listings, found that buyers’ budgets were largely below listed house prices, especially in the major capitals.

Domain chief residential economist, Dr Nicola Powell, said while the national market was cooling, detached houses had continued to be out of reach for many Australians, particularly in Canberra, Melbourne, and Sydney.

“Across all of our major capital cities, particularly for detached houses, when you look at buyer budgets versus what is being supplied, there is a big misalignment there on that national level,” she told REB.

Powell said town houses were an emerging affordability alternative, while units were already the most buyer-aligned housing segment, with budgets sometimes even listing price points.

“We’ve seen three rate hikes this year that’s taken borrowing capacity down by up to 8 per cent. So it doesn’t necessarily mean that we’ve seen an instant alignment between buyers and sellers,” she said.

Houses

According to the data, Sydney buyers were hit with the hardest reality check across all suburbs, with purchasers having a budget gap of $400,000, $100,000, and $177,000 in the inner, middle, and outer ring respectively.

Similarly, Brisbane buyers targeted properties above their means, recording housing gaps across all three rings at $350,000, $200,000, and $94,000.

Meanwhile, Melbourne’s inner ring was $440,000 out of reach for buyers, but the middle and outer ring listing prices were within budgets.

Canberra recorded the largest inner-ring gap, being $538,000 above buyer expectations, while the middle ring was $71,000 above, and the outer ring was slightly below.

In Adelaide, inner-ring house prices were $250,000 above budgets, while its middle ring was perfectly aligned with buyer expectations.

Similarly, Perth’s inner-ring houses were $190,000 above searched prices, but the city recorded the narrowest outer-ring gap, which was almost on par with buyer expectations.

Town houses

While the town house market had mixed results, the data showed it was emerging as an affordable alternative to houses.

In Sydney’s inner ring, budgets were $100,000 above prices, although the price advantage disappeared further out, with the middle and outer rings being above expectations.

On the other hand, Adelaide, Brisbane, and Perth showed a strong alignment between buyer expectations in the middle and outer rings, where buyer search budgets were at or above listing prices.

Melbourne’s town house affordability improved with distance, with the inner ring staying $150,000 above budgets, before narrowing in the middle ring, and falling $40,000 below budgets in the outer ring.

Canberra showed the largest inner-ring discrepancy, with buyers searching around a $400,000 gap below budget, although the middle ring turned into a $110,000 gap in purchasers’ favour.

Units

Out of all property types, units showed the least difference between buyer searches and listed prices across cities and inner, middle and outer rings.

In Sydney’s inner ring, listings were $50,000 above what purchasers searched, while the middle and outer rings were more aligned, at $35,000 and $29,000 respectively.

Melbourne showed a balance for the most part, with inner-ring prices almost matched to expectations ($3,000), and the middle ring on par, with the outer ring $41,000 above budgets.

Brisbane was also heavily aligned, with no gap in the inner and outer markets, and a $50,000 buyer advantage in the middle ring.

Units across the smaller capitals were largely affordable, with Hobart having the largest affordability buffer.

Across the city, buyers searched $128,000 above listings in the inner ring, $166,000 above in the middle and $99,000 above in the outer ring.

Similarly, Canberra also had a substantial buffer, particularly in the middle ($120,000) and outer ($111,000) rings.

Powell said town houses were becoming increasingly popular as they were cheaper than a house, but more attractive to a wider demographic than an apartment.

“They often offer a compromise between space, location and price, making them a key part of Australia’s affordability adjustment,” she said.

She said that as time went on, there were likely to be more medium-density properties appearing across major capital cities.

“We’ve got some capital city markets that show a large house premium and town house markets are generally a much closer balance, and many buyers are willing to trade the land size for location.”