The million dollar suburb club

While value growth across the Perth property market slumped significantly over the past 18 months or more, results out today confirmed that a 35% growth in the million dollar property market in 2010 has given the city a boost with Peppermint Grove still Australia’s most expensive suburb.

With a median house price of $4.6 million, Peppermint Grove is almost $1 million more expensive than the second placed suburb, Vaucluse in Sydney ($3,787,500). Peppermint Grove has been the nation’s most expensive suburb for three consecutive years now.

During 2010, 212 suburbs across the country recorded a median price of $1 million for the December quarter. (Note: This figure only includes those suburbs which have recorded at least 10 sales during the calendar year).

Of the 212 suburbs with a median price of at least $1 million, 56% were in Sydney, New South Wales and 20% of suburbs were located in Victoria. These were then followed by Western Australia (12%), Queensland (6%), South Australia (3%), Australian Capital Territory (2%) and Northern Territory (0.5%).

Over the year, the number of suburbs nationally with a $1 million price tag has increased by 35%. This has occurred despite the fact that during 2010 capital city home values have only increased by 4.7%.

Across council areas, Ku-ring-gai in Sydney has recorded the greatest number of suburbs in the million dollar club with 15 suburbs having a median price of $1 million or greater. Other council areas with a substantial number of $1 million plus suburbs include: North Sydney (12), Woollahra (10) and Brisbane, Canada Bay and Boroondarra (each nine).

During 2010, only five suburbs with a median price of at least $1 million recorded the benchmark for units with the remaining 207 suburbs having recorded houses as the dwelling type.

Over the past five years, the premium sector has typically fared quite well (outside of 2008) and has recorded strong growth in property values.

In 2005, just 78 suburbs across the country had a price tag of $1 million or more. In just five years, the number of $1 million plus suburbs has increased by 172%. Victoria has recorded the greatest increase in suburbs with a $1 million price tag over the five years, increasing by 950% during the period.

Tasmania is the only state which doesn’t currently have a suburb with a median price in excess of $1 million. That states most expensive suburb, Battery Point, has a median house price of $750,000.

Today’s results highlight that not only has demand and price growth been strong for premium property, but they also indicate that residents are prepared to pay the hefty price to secure a property in a premium location.

During 2011 we would expect that there is unlikely to be a further 35% increase in the number of suburbs within the $1 million club. We are anticipating subdued residential property market conditions during the year and the premium sector’s performance will also likely be impacted by high interest rates and ongoing global economic uncertainty. These conditions are likely to hamper purchaser confidence and reduce the propensity of buyers to spend in excess of $1 million.

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