Is affordability causing property growth to stall?

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Problems with affordability could be causing growth in the residential property market to stall.

According to new research by, residential capital growth rates for May were lower than expected, with numbers dropping in many capital cities.

Nationwide, houses values grew by only 0.36%, while unit values dropped by 0.23%, in May.
This compares to last quarter where house values grew by 1.71% and unit values grew by 1.17%. consulting analyst John Edwards said the data clearly pointed to the difficult affordability conditions for the median family in most capital cities.

The number of people who could afford to buy and then repay a loan for a home was now limited, he said.

For example, when looking at the calculated figure the median Sydney family would have to spend after tax and meeting home loan repayments, it was too small to maintain a reasonable standard of living.

“The Sydney median family who buy the current median property valued at $823,500 with a 20% deposit only have around $821 per week to spend after making home loan repayments. This amount is clearly insufficient for comfortable living.”

In May, Sydney house growth stalled at just 0.24% - although it still recorded 17.42% growth over the last 12 months.

The data also indicated that the Sydney unit market had passed its peak, with growth of 2.81% for the quarter ending May.

Edwards said it was not clear whether the house and land market had arrived at the same position – although auction clearance rates suggested the market was slowing.

Meanwhile, Melbourne house values fell by 0.03% in May, which meant they entered negative territory. However, over the past 12 months, this market recorded 9.45% growth.

Slower growth rates would be beneficial for the economy, as they meant a property market “bubble” followed by a severe correction was likely to be avoided, Edwards said.

However, the Sydney market was still overvalued and too expensive, he added.

“The data from May is not sufficient on its own to confirm that this lower rate of growth is about to be a new feature, but my best guess is that this will be the case.”

May 2014 house and unit growth rates by state and by capital:
Area Median Value Growth
May 2013-May 2014
Last Quarter May 2014
ACT $531,500 2.28% 0.07% 0.55%
Adelaide $412,000 4.61% 1.55% -0.15%
SA Country $252,500 -0.37% -2.85% -0.29%
Brisbane $467,000 7.52% 2.77% 0.41%
QLD Country $379,000 2.76% 1.33% -0.51%
Darwin $575,500 1.30% -1.22% -0.53%
Northern Territory $538,500 3.24% 1.92% 0.98%
Hobart $361,000 0.41% -1.18% -0.82%
TAS Country $266,500 -0.32% 2.18% 0.87%
Melbourne $627,500 9.45% 1.77% -0.03%
VIC Country $337,500 3.52% 0.64% 0.28%
Perth $526,500 4.19% -2.24% -1.90%
WA Country $352,500 2.87% 5.01% 2.38%
Sydney $823,500 17.42% 4.72% 0.24%
NSW Country $375,500 7.15% 1.65% 0.34%
Australia $464,500 5.76% 1.71% 0.36%
Area Median Value Growth
May 2013-May 2014
Last Quarter May 2014
ACT $410,000 1.07% -0.56% -0.28%
Adelaide $315,000 3.53% 2.54% 0.64%
SA Country $239,000 13.73% 6.43% -0.02%
Brisbane $364,500 5.27% 1.59% -0.22%
QLD Country $314,500 4.93% 1.38% 0.62%
Darwin $431,000 2.50% 0.43% 0.42%
Northern Territory $416,000 4.26% 2.38% 1.53%
Hobart $261,500 7.12% 2.31% -2.38%
TAS Country $189,500 -6.47% -5.77% -2.73%
Melbourne $458,000 6.32% 1.58% -0.07%
VIC Country $257,000 1.21% -0.39% -0.20%
Perth $459,000 1.84% 1.14% -1.21%
WA Country $322,500 6.54% 0.90% -1.02%
Sydney $562,000 13.59% 2.81% 0.27%
NSW Country $315,000 6.86% 2.15% -0.08%
Australia $428,500 6.88% 1.17% -0.23%

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  • Andrew Stone says on 20/06/2014 06:04:46 AM

    The only way I would ever be able to buy a house again is if i could access my super , currently stuck in 1 bedroom hovel wich costs 1/2 my income (which is not much)(unemployed) but i have $100k in super that i cannot access. I cant be the only one?

  • Pascoe says on 21/06/2014 08:16:09 PM

    I'm all for people accessing their long as they sign a binding agreement that they will not be a burden on the welfare system in the future. For example, if you take 100k of your Super now, than at retirement age you are assessed as having 100k in Super including a calculated median growth rate.

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