Both NSW and QLD have experienced growth in property prices in recent years, but it's clear that NSW’s higher than average property prices have contributed to low levels of FHB activity.
While we wait to cheer on our respective states in the upcoming State of Origin, we’ve compared the housing prices of NSW and QLD to better understand how property prices influence first home buyer activity in each state.
A recent study by Mortgage House (2015) found that NSW has the lowest percentage of first home buyer activity compared to any other state in Australia. With first home buyers accounting for only 3.85% of overall loans in February 2015, these low levels of first home buyer activity can be attributed to the fact that Sydney features the highest national median dwelling price of $760 000.
On the flip side, QLD has reported strong first home buyer activity with a 17% first home buyer participation rate. In contrast to Sydney, Brisbane hosts a much lower median dwelling price of $452 000.
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Median house prices in Sydney have increased from 7% in 2012-2013 to 17% in 2013-2014, and this growth is forecast to continue throughout 2015. As a result, housing affordability has deteriorated as owner occupied demand has plateaued.
Industry experts expect that Sydney’s median house price will peak at $915 000 by June 2016. However, as variable interest rates are likely to rise to 6.8% by 2016, housing affordability within Sydney will weaken considerably.
Moreover with the tightening of monetary policy, the rate of price growth for Sydney housing is expected to slow down in the near future, as evidenced by the graph below. Rising interest rates may dampen first home buyer activity as mortgage repayments become more expensive.
Regional New South Wales
Price growth of housing in regional areas of NSW such as Newcastle and Wollongong have been more stable.
The growth of house prices in Newcastle increased by 8% in 2013-2014 while the price growth of property in Wollongong was 10% during this time.
However, housing in these areas has become more affordable relative to Sydney, with the median Newcastle house price being 52% of the Sydney median price in June 2014.
Brisbane has experienced 5.6% growth in median house prices during 2013-2014, with housing affordability for Brisbane residents at its best level since 2003. With increased demand in recent years, the price growth of housing is forecast to strengthen for the remainder of 2015.
Industry professionals forecast that Brisbane property prices will increase by 17% over 2014-2015 and 8% over 2015-2016.
It is predicted that Brisbane’s median house price will reach $560 000 by June 2017; a 17% increase from June 2014, as represented below.
Regional areas of Queensland including the Gold Coast and Sunshine Coast have experienced relatively stable growth in housing prices in recent years.
Median house growth in the Gold Coast witnessed 11% in 2013-2014 and is forecast to grow by 7% in 2014-2015.
Whereas the Sunshine Coast experienced an 8% rise in the median house price in 2013-2014, with property prices expected to increase by 6% for 2014-2015.
Compared to Brisbane, population growth in both the Gold Coast and Sunshine Coast is influenced by interstate migration, which rises during times of soaring house prices, as FHBs deviate towards these regional areas.
It is clear that both NSW and QLD have seen significant rises in the price of property in recent years. While median property prices in Sydney have increased by 7% in 2012-2013 to 17% in 2013-2014, Brisbane has also recorded strong growth of 5.6% in 2013-2014 to 17% in 2014-2015.
However, as the Reserve Bank is expected to increase the cash rate early next year, this may have a drastic impact on the growth of property prices, the value property, as well as first home buyers’ ability to service their loans in each state.