Source: ANZ statements
The relative ‘under-performance’ in Melbourne dwelling values – that has led to a comparatively affordable market over time – is due to more supply of dwelling completions over the past 15 years. ABS building activity data[1] shows there were 21 per cent more dwelling completions in Victoria when compared to NSW in the same period.
In 2023, there was also a further departure in affordability between house and unit values, which currently remain at elevated levels of 28.6 per cent. Prior to the pandemic, the decade average difference between house and unit values nationally was 7.3 per cent.
ANZ Senior Economist, Adelaide Timbrell said: “The time to save a 20 per cent deposit has only shifted by around two months nationally for units since the onset of COVID-19, while for houses the time to save has blown out by almost two years.”
“This presents a clear shift for those hoping to enter the housing market, as units have stayed within a reasonable price range for new home buyers, while houses have become more out of reach.”
Regional dwelling markets are also seeing a sustained uplift in purchase values since the start of the pandemic, even more than the capital city dwelling markets, highlighting that regional Australia is no longer the affordable alternative to capital cities.
CoreLogic Head of Australian Research Eliza Owen said: “Regional Australia is often thought of as a more affordable alternative for housing, a way to reduce housing costs by compromising distance to major employment hubs.”
“The COVID-boom in regional migration and values means it’s really not that much more affordable now, and there’s very little difference in the combined regional and capital city affordability metrics.”
As of October, the regional Australian dwelling market has sustained a 44.4 per cent uplift in dwelling purchase values since the start of COVID, compared with a 26.4 per cent uplift across the capital city dwelling market.
“In 2024, housing affordability is likely to get worse before it gets better. Dwelling supply will continue to be strained by the high interest rate environment, which has reduced approvals and potential for new housing development in 2024. Demand will probably be the only thing can adjust in the short term, so we may see average people per household rise,” Miss Owen said.