Buyers move towards higher priced property

As 2009 started to roll out, most of the buyer activity was taking place at the lower and more affordable end of the property price spectrum, but as the year progressed, higher priced properties returned to favour, indicating stronger buyer confidence in this market by investors.

During the first quarter of 2009 sales of $1 million or greater accounted for 3.3% of national house sales and by the third quarter increased to 5.1%.

Simultaneously, during the first quarter of 2009 three out of every five capital city unit sales occurred at prices below $400,000 and by the third quarter these price points accounted for slightly more than half of all sales (53.5%).

Nationally during 2009, a vast majority of house sales occurred at prices below $400,000. In the first quarter houses in this price range accounted for 58.7% of all sales and by the third quarter they accounted for 51.5% of sales.

As the year progressed, sales volumes within the price points below $400,000 fell while all price points above $400,000 saw their total market share increase, indicating a shift in the market toward higher priced houses.

Around the capital cities, house prices tended to be more expensive. This was reflected by the fact that the $300,000 to $400,000 price point has consistently had the greatest share of sales during 2009.

Less than $300,000, and the $300,000 to $400,000 price points have seen significant declines in market share over the year, where losses by those properties priced under $400,000 has resulted in increases in the proportion of sales in all price points above $500,000 and the $400,000 to $500,000 price point has seen a negligible change in its market share.

Despite the move away from lower priced stock during the year, capital city house sales at prices under $500,000 accounted for three out of every five sales during the third quarter of 2009.

The $1 million plus market saw strong growth during the year accounting for 4.7% of sales during the first quarter increasing to 7.5% by the third quarter.

Nationally, unit sales recorded their greatest volume of sales at price points below $300,000.

Unit sales under $500,000 accounted for more than four out of every five sales during the first quarter, falling to just below four of every five sales (77.6%) during the third quarter.

Similar to what was experienced within the national housing market, price points below $400,000 recorded falls in market share after the first quarter while all price points above $400,000 recorded an increase in their share of sales during the second and third quarters.

As was reflected in the national results, units priced below $400,000 in capital cities have seen market share erode during the year but on the flipside, units in the more expensive price brackets witnessed an increase.

During the first quarter three out of every five capital city unit sales occurred at prices below $400,000 by the third quarter these price points accounted for slightly more than half of all sales (53.5%).

Sales of units priced at, or in excess of $1 million, held a greater market share than either of the price points between $800,000 and $1 million during all three quarters.

This change in market activity can largely be attributed to the improvement in buyer confidence amongst investors and non-first home buyers.

The market recovery was led by first home buyers who were motivated by historically low interest rates and the Government stimulus. As the economy continued to recover and business and consumer confidence improved, buyers became active in the higher priced segments of the market.

With values up 11.3% over the first 11 months of the year, we can also attribute some of the new market dynamic to bracket creep – where houses once priced under $300,000 are now achieving a value beyond $300,000.

This is a trend that is likely to continue into 2010 where we expect fewer first home buyers and more investors/upgraders to be active in the market. The premium markets (ie. the top 20% of homes based on price) have already started to outpace the broader market in terms of price growth as demand for these properties improves.

Cameron Kusher is a research analyst at RP Data.