Nerida Conisbee
Ray White Group
Chief Economist
All suburbs across Australia are now seeing year on year price growth. There is however a significant difference between the best performers and those not achieving such stellar growth. Closer analysis of this provides an indication of what is driving the property market at the moment and the significant differences between capital cities..
The top performers right now are not surprisingly in Perth. Perth is leading the country with price growth in excess of 20 per cent year on year. Rents are also rising sharply and are the strongest in the country, up more than 18 per cent over the same time period. Within Perth however it is overwhelmingly the outer suburbs that are seeing the largest increases. Topping the list is Maddington in Perth’s outer south-east with prices having increased by 26.7 per cent.
The bottom performers are all in Melbourne, or in regional VIctoria, close to Melbourne. Whereas the outer suburbs of Perth are the top performing suburbs, those at the bottom are predominantly outer suburbs of Melbourne. Epping – West, in Melbourne outer north and Melton – West in the outer west top the list for the least growth in the country. Prices have increased by just 4.15 per cent.
Why are Perth’s outer suburbs doing so well? It is likely that high construction costs are a driver. It is simply cheaper to buy than to build at the moment. A home built in Maddington in 2019 is far cheaper than one being built now. This is driving more people into the established market.
While Perth’s outer suburbs are doing well because of high construction costs, it is then curious that Melbourne’s outer suburbs are not seeing a similar trend and are in fact the poorest performing suburbs in the country. It is likely general weakness in the Melbourne market is at least partly to blame. While Perth’s prices are up over 20 per cent over the past 12 months, Melbourne’s are up just 5.5 per cent. Melbourne’s outer suburbs are not performing that well on a national basis but compared to Melbourne as a whole, the gap is far more narrow.
On a capital city basis, there are some further interesting trends. In all capital cities, with the exception of Melbourne, the top performing suburbs in percentage terms are outer suburban while luxury suburbs are seeing comparably much lower growth, reflecting the cheaper to buy than build driver. In Perth, Peppermint Grove is seeing a strong 12.1 per cent growth but this is much lower than Maddington’s 26.7 per cent. In Sydney, Lethbridge Park in the outer west has seen prices increase by 9.2 per cent, one of the strongest in the city. The poorest performer has been Mosman-North where prices are up 6.2 per cent.
In Melbourne, low cost suburbs are seeing weak growth while the top performers are medium to high priced suburbs like Templestowe and Ringwood North, almost the exact opposite to the rest of the country.
March inflation came in at 3.6 per cent last week, still higher than the Reserve Bank of Australia target range of between 2 and 3 per cent. A rate cut is coming but its likely date is getting pushed out to later in the year, or even next. Regardless, the onward march of Australian house prices continues however with some distinct regional differences.
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