Proportion of expensive sales climb sharply since the GFC

Feb 25 2011 / 10:39 am Was written by Atwell & Co. Comments Off
Proportion of expensive sales climb sharply since the GFC
During the final quarter of 2008, capital city dwelling sales in excess of $500,000 accounted for around 28% of all sales, over the final quarter of 2010, 46% of all sales were at prices above $500,000.Across the combined capital cities, there has been a surge in activity for more expensive properties since Australia began to rebound out of the Global Financial Crisis (GFC). During the final quarter of 2008, which was also the most recent low in capital city home values, 72.2% of all sales were at prices below $500,000. During the final quarter of 2010, only 54.4% of sales were at prices below $500,000.

capital city sales 2008

The shift in property sales away from the 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 a total of 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% of the market.

There has been a sharp decline in the volume of sales of capital city properties below $300,000. In fact, over 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%).

Capital City Sales 2009

Over the last 12 months capital city home values have increased by 4.7% and the bracket creep away from more expensive properties has continued however, it certainly has not been significant as the increase over the past two years. The slowdown in the rate of increase in sales activity amongst higher priced properties is certainly a reflection in 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 have been: Melbourne (27.4%), Darwin (20.9%), Sydney (18.9%) and Canberra (15.3%). Meanwhile, the weakest performing markets have been: Brisbane (5.9%), Perth (7.6%), Adelaide (10.7%) and Hobart (14.7%). What is somewhat interesting is that three of the four worst performers are also three of the most affordable capital cities in which to purchase properties (Hobart, Adelaide and Brisbane).

Final Qtr 2008

Looking back to the final quarter of 2008, every single 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, in which sales of dwellings in excess of $1 million accounted for more than 5% of all sales,

Final Qtr 2010

During the most recent quarter, the number of sales at price points below $500,000 has declined markedly. In fact, Canberra (34.2%), Sydney (37.6%), Darwin (39.0%) and Melbourne (41.6%) each recorded less than 50% of their sales at prices below $500,000. It is also no coincidence that these four capital cities have been 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 also declined.

All eight capital cities have recorded a 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 that 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 capital growth within the premium markets and the most affordable markets. Given this if there is significant change in the proportion of sales by price point over the year we would expect activity to increase for those properties priced between $300,000 and $700,000.

Article By RP DATA –

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