Property market update: Cheapest area for new homes
After the RBA opted to leave interest rates on hold last week, this week we look at the cheapest and most expensive areas to build a new home in Australia.
Western Sydney suburbs dominate cheapest new builds
High land values and a drive to keep homes at an affordable price point means that western Sydney suburbs continue to dominate the cheapest areas for new homes built in Australia.
While homes being built at low cost is good news for affordability, it isn’t great if low cost leads to poorer quality.
Fortunately, this doesn’t seem to be an issue in the new house and land development suburbs of Sydney, however, quality continues to be problematic for a number of apartment buildings built over the past five years.
Tough times for new builds in Toorak
In Victoria, Toorak residents spent less on their new homes in 2019 when compared with the previous year, but it remains the suburb that sees the most expensive new homes being built in Australia.
On average, $3.7 million is being spent on building a new home in Toorak, although this declined from $4.1 million last year.
It is still quite a bit more than in Rose Bay, Vaucluse and Watsons Bay where $2.9 million is being spent on new homes.
It is likely that the amount spent on luxury new homes will continue to remain high.
A lack of stock in premium suburbs is likely to encourage more people in these suburbs to either knock down rebuild or renovate.
Also, the extremely high stamp duty payable to buy a home in these suburbs would also be a deterrent.
Low interest rates would also help many people looking to build or renovate get the funds that they need.
South Australia dominates the strongest price growth list
When looking at the strongest price growth list, the positive mining town story continues with SA and QLD mining towns seeing the strongest growth at the moment.
The only metro suburb making this list now is north Adelaide, which has been going strong for some time now.
While the only non-metro non-mining town to make this list is Quarry Hill (which ironically sounds like a mining town), an inner suburb of Bendigo.
Looking backwards is of course not the best predictor of growth. Mining towns probably have a bit more growth in them, but do have a tendency to boom/bust depending on the length of the mining projects.
Right now, demand on realestate.com.au continues to show a premium market story – buyers rushing to get in at where they see as rock bottom in Sydney and Melbourne.
Clearance rates still very high
As the spring selling season got underway over the weekend, clearance rates were at 78% in Melbourne and 81% in Sydney but this was off the back of very low auction volumes.
Clearance rates are likely to moderate slightly as listings creep up in the months ahead.
It does however look like the downturn is well and truly behind us, although we are unlikely to see sharp increases in pricing across capital cities.