Million dollar cities: Why even the smaller capitals have joined the millionaire club

Homes in Australia’s capital cities have reached a shocking new threshold with the median price of a house surpassing $1 million for the first time this quarter.

For a long time, $1 million was a figure reserved only for the homes of the ultra-wealthy. However, the Australian property market has undergone significant price growth in recent years with $1 million now barely enough for a modest family home in many capital cities, often in the outer suburbs.

The latest PropTrack Home Price Index shows the median house price in Australia’s combined capital cities reached $1,082,000 in July.

REA Group senior economist Anne Flaherty said prices increased in every capital city except the ACT, where the median house price sits at $959,000.

“Lower interest rates will help to improve borrowing capacities and add to price growth momentum,” Ms Flaherty said, noting affordability remains a key barrier for many buyers.

Buyers who want to stay in a capital city and have a budget of around $1 million do have some options if they are prepared to make some sacrifices.

With that in mind, what geographical areas of capital cities have houses that are selling for that magic figure of a million dollars, or thereabouts? What can you get for your money?

Affordability worsens in smaller capital cities

Strong price growth has seen homes in previously affordable capitals soar towards the million-dollar mark.

Home values in Brisbane, Adelaide and Perth have risen by around 90% in the past five years, PropTrack data shows, compared to 41% growth in Sydney and 19% growth in Melbourne.

Adelaide remains Australia’s strongest performing capital city recording the highest growth over the month and the year. Median house prices in the city’s central and Hills region sit around $1.25 million, though buyers can still find homes in Adelaide’s north (median $735,000), south ($894,375) and west ($980,000) for under $1 million.

Sarah Sheppard from Harcourts Sheppard in Torrensville, in Adelaide’s west, says the demand for properties just under that $1m mark, in suburbs such as Torrensville, Mile End, and Thebarton, is high.

“I know exactly what you get for that, it’s quite simple, so you either get a turn of the century, or between 1900 – 1920s era (house). You will pick up either a beautifully renovated two-bedroom attached property, or a more tired attached three-bedroom property, or a modern three-bed, two-bath single car on a tiny parcel of land,” Ms Sheppard said.

“It’s just enjoyable living, everything is at your fingertips, and you don’t need to cross town for any particular reason,” she said.

A home on what is considered a traditional family block, being around 600 or 700sqm, could still be around the $1m mark if they are unrenovated, she added, but buyers wanting a modern four-bedroom home need a larger budget, or to move further out of the capital.

While Adelaide is experiencing growth, it is still relatively affordable compared to some other capitals. Ms Sheppard said investor activity was picking up on the back of recent rate cuts.

“The investors disappeared when the rates went back up; they just put their hands back in their pockets, and it wasn’t the time to buy an investment property … so it is quite obvious now that they know that the rates are coming down … and they are coming back,” Sarah says.

The older style houses on larger blocks are especially popular. As investors, there is a possibility to subdivide for dual income, and for some families, having a backyard for the kids is an attraction.

Brisbane’s median house price reached $1.07 million in July, with buyers pushed to the city’s outer suburbs for freestanding homes below a million dollars.

Ben Carroll from Harcourts Property Centre in Wynnum Manly covers the eastern suburbs of Brisbane (median $1,080,000) and has seen quite a shift in the behaviour of purchasers as Brisbane prices have continued to spiral.

He said buyers with a budget of approximately a million dollars face three choices. They can purchase a unit or townhouse, a modern home on a housing estate on a small block, living way outside the city with a hellish commute, or they can lower their expectations and buy an older house in places like the eastern suburbs.

These homes, located in suburbs like Wynnum West or Hemmant, are three-bedroom, one-bathroom post-war homes on a block size of around 450sqm. They are generally in good condition, though often a bit tired and in need of a cosmetic refresh.

“For a lot of people, that’s the entry mark for first-home buyers who are prepared to spend around $1.1 million to get into the market,” Mr Carroll explained.

Slim pickings in Sydney

With a median house price of $1.56 million, Sydney remains Australia’s most expensive capital city.

Buyers seeking a house on a million dollar budget have virtually no chance within the inner city, harbour and beachside regions. But there are still a few options in the south west and far west.

Zac Cronin from My Property Consultants in Gregory Hills has been selling houses in the Camden and Campbelltown areas for over twenty years and has seen increasing numbers of people flocking to the area after being priced out of inner-city options.

“There are two options available for purchasers. They could buy a post-war three-bedroom home with a decent-sized backyard, or a more modern family home in an estate, but the sacrifice is smaller lots and closer neighbours,” Mr Cronin said, noting families are often choosing units over houses to get onto the property ladder.

He said for just under a million dollars, buyers could pick up a three-bedroom, two-bathroom, single-car home on a block of 270-350sqm.

Despite underperforming the other capital cities, Melbourne’s remains a million-dollar-city with a median house price of $983,000.

Again, buyers need to look further afield with homes in the north east (median $814,000), west ($690,000) and north west ($743,000), and the south east ($815,000) offering more affordable houses.

In the most affordable capital cities of Hobart and Darwin, buyers can find freestanding homes within close proximity of the CBD for well under $1 million.

The post Million dollar cities: Why even the smaller capitals have joined the millionaire club appeared first on realestate.com.au.