Expensive sales climb sharply since the GFC

Across the combined capital cities there was a surge in activity for more expensive properties since Australia began to rebound out of the global financial crisis. During the final quarter of 2008, which was also the most recent low in capital city home values, 72.2% of sales were at prices below $500,000. During the final quarter of 2010 only 54.4% of sales were at prices below $500,000.

The shift in property sales away from cheaper price points and towards more expensive ones is no real surprise given that since the end of 2008 property values across the combined capital cities have increased by 17.3%.

Despite the move away from more affordable price points property sales priced between $300,000 and $500,000 still account for the largest proportion of transactions.

At the end of 2008 property sales priced between $300,000 and $500,000 accounted for 47.7% of the market and during the most recent quarter they accounted for 41.6%.

There has been a sharp decline in the volume of sales of capital city properties below $300,000. During the last quarter property sales under $300,000 (12.4%) were only slightly higher than the proportion of sales greater than $1 million (9.5%).

Over the past 12 months capital city home values have increased by 4.7% and the bracket creep away from more expensive properties has continued but it certainly has not been as significant as the increase over the past two years.

The slowdown in the rate of increase in sales activity among higher-priced properties is a reflection of the slowing rate of capital growth following annual capital gains of 12.1% during 2009.

When looking at individual capital cities you can see the shifts in individual markets.

Since the end of 2008 the best performing capital city markets in terms of value growth were Melbourne (27.4%), Darwin (20.9%), Sydney (18.9%) and Canberra (15.3%).

The weakest performing markets were Brisbane (5.9%), Perth (7.6%), Adelaide (10.7%) and Hobart (14.7%).

It is interesting to note that three of the four worst performers were also three of the most affordable capital cities in which to purchase properties – Hobart, Adelaide and Brisbane.

Looking back to the final quarter of 2008 every capital city still recorded a majority of dwelling sales occurring at prices below $500,000.

The cities with the greatest proportion of sales under $500,000 at that time were Hobart (88.5%), Adelaide (80.8%), Brisbane (73.3%) and Darwin (72.7%).

Even though Sydney had the lowest proportion of sales at prices below $500,000 more than 50% of sales (55.3%) were priced below $500,000.

During the final quarter of 2008 the premium residential market had been dramatically impacted by the economic downturn.

Sydney (11.7%) and Melbourne (6.3%) were the only two cities at that time where dwellings in excess of $1 million accounted for more than 5% of all sales.

During the most recent quarter the number of sales at price points below $500,000 has declined markedly.

Canberra (34.2%), Sydney (37.6%), Darwin (39.0%) and Melbourne (41.6%) recorded less than 50% of sales at prices below $500,000.

It is no coincidence that those four capital cities were the best performers in terms of capital growth since the end of 2008. Across all other cities the respective proportion of sales below $500,000 has declined.

All capital cities recorded marked improvement in the proportion of sales in excess of $1 million. Over the final quarter of 2010 almost 20% of all Sydney house and unit sales were in excess of $1 million.

With growth in capital city home values slowing over the second half of 2010 and an expectation of limited value growth in 2011 we anticipate the proportion of sales by price point will not fluctuate this year as substantially as it has over recent years.

With interest rates at above average levels we have already seen this begin to impact on capital growth within premium markets and most affordable markets.

If there is significant change in the proportion of sales by price point over the year we expect activity to increase for properties priced between $300,000 and $700,000.

Tim Lawless is the Director of Property Research at RP Data.