Where you can still find a property for less than $500,000

Home buyers who have a $500,000 budget could afford fewer than one in 10 properties in some markets as affordable property options plummet.

In some once-affordable neighbourhoods, the share of property sales below the half-million dollar mark has halved or more over the past five years, leaving behind those still looking to buy.

First home buyers are finding it harder to find cheaper properties.Credit: Peter Rae

A Sydney home buyer on such a budget could have purchased about one in six homes that sold in 2019, property settlement data from PEXA shows. Their options had dropped to about one in 11 homes, or 8.9 per cent, by last year.

While the proportion of affordable home sales has almost halved, transactions exceeding $2 million have more than doubled in Sydney since 2019, rising from 7.7 to 15.7 per cent of sales.

Affordable properties have also become less common in Melbourne, where sub-$500,000 sales constituted 28.8 per cent of settlements last year, down from 38 per cent in 2019. In Brisbane, they accounted for a third of sales, down from half just two years earlier.

About one in two transactions in Melbourne and Brisbane were in the $500,000 to $1 million price range last year, as were about 45 per cent of Sydney sales, but the ranks of their more expensive price bands were also growing, though at a slower rate.

Settlements above $1.5 million accounted for 11.1 per cent of sales in Melbourne and 6.4 per cent in Brisbane last year.

PEXA’s head of research Mike Gill said significant property price growth in recent years had been detrimental for affordability, particularly in Sydney.

“Property prices have risen over the period, so a lot of those more affordable properties have moved up a price band, but it also suggests less stock availability at that more affordable range which impacts first home buyers.”

There were 9120 Sydney homes sold for less than $500,000 last year, compared to about 27,270 in Brisbane and about 36,300 in Melbourne, Gill said, attributing the lower volume in Sydney to greater constraints on new housing supply due to the city’s geographical position, topography and arduous planning system.

Meanwhile, enormous price growth in Brisbane during the pandemic – after years of stagnant prices – meant it was catching up to Melbourne, which had more subdued gains, Gill said.

The proportion of cheaper sales fell across most regions in each city. Some of the largest declines were in more affordable regions, popular with first home buyers seeking detached dwellings and house and land packages, Gill said.

In Sydney’s Blacktown, the chances of buying a sub-$500,000 home have plunged. Sales under this threshold made up a third of transactions in the Blacktown region in 2019, but fell to fewer than one in 10 last year. The Central Coast recorded a similar drop, from just over a third to just over one in 10.

In the outer west and Blue Mountains region, as well as the south-west, the chance of buying under half a million has halved in the same time period.

In Melbourne’s Mornington Peninsula, more than a quarter of sales were struck below $500,000 in 2019, before pandemic lockdowns sent sea-change demand through the roof. By last year fewer than one in 10 sales here were at that price.

Affordable sales also dropped from 63 per cent to 45 per cent of sales in Melbourne’s west and from about one in six to one in 12 in Melbourne’s outer east.

But there were exceptions, such as Sydney’s Parramatta region and city and inner south, where new supply of higher-density housing slightly boosted sub-$500,000 sales, though they still remain low. It was a similar story in inner Melbourne, where the proportion dropped marginally, which Gill attributed to new apartment construction keeping a lid on price growth.

A previous Productivity Commission study found housing would be more affordable if more homes were built, while a recent NSW Productivity Commission report also found higher-density building could reduce apartment prices and rents and stall the exodus of young people. The report warned Sydney risked becoming a city with no grandchildren.

McGrath Parramatta’s Amit Nayak said new apartments in the region meant there had been limited price growth, and declines in some pockets, offering some relief for first home buyers.

With a budget of $500,000, buyers could expect an older two-bedroom, one-bathroom apartment in suburbs such as Merrylands or Guildford, while a similar unit in Parramatta proper would likely cost upwards of $550,000, Nayak said.

“In Merrylands, Westmead, Guildford, Wentworthville and Northmead, the apartment market has been quite steady and there has not been the price growth [seen elsewhere] … and the main reason is the supply of apartments,” he said.

By comparison, a buyer in Melton, on the outskirts of Melbourne’s west, could opt for a modern home on a small block or a fixer-upper on a big block, said Barry Plant Melton’s Ned Nikolic.

“We’re the cheapest suburbs in Melbourne, so $500,000 can get you a small house, say a 15-year-old house or a 30-year-old renovated property … with three bedrooms, three bathrooms, and a double car garage,” he said.

There was little doubt that budgets no longer stretched as far as they once had.

“About five years ago … for $500,000 you had the pick of the bunch … and those properties that are now [in that range] would have been around $300,000.”