First home buyers squeezed out of their ideal suburbs are increasingly looking beyond city centres, new research shows

First home buyers squeezed out of their ideal suburbs are increasingly looking beyond city centres, new research shows
Credit: Getty
  • First home buyers are venturing beyond city centres as affordability continues to hit prospective entrants to the market.
  • As work from home policies become the norm, many are looking further afield to regional centres.
  • Suburbs that have received the highest rate of enquiry from prospective first-time buyers at the end of last year have been located on the city fringe and regional pockets.
  • Visit Business Insider Australia’s homepage for more stories.

Following a year that saw Australian property prices skyrocket by 22%, first home buyers squeezed out of their ideal suburbs are increasingly looking beyond city centres, new data from REA group shows. 

The suburbs that have received the highest rate of enquiry from prospective first-time buyers at the end of last year have been located on the city fringe and regional pockets, the research showed

Houses in the outer-Melbourne suburb of Craigieburn, 25 kilometres from the CBD, came in second on the top 10 list for first home buyer enquiries. 

Further afield, the satellite suburb of Pakenham on the fringe of the Gippsland came in third, also for house searches.

The fourth most-enquired-about suburb among first-time buyers was Pimpama, halfway between Brisbane and the Gold Coast in southeast Queensland. 

However, bucking the trend was the Melbourne CBD, which came out first in the top 10 list. 

In contrast to most other major cities, Melbourne saw a drop in apartment prices; a result of the ongoing slump in demand driven by the loss of international students and workers. 

A mass exodus of residents from the city centre during the COVID-19 pandemic has left around 3,000 apartments currently available for sale.

Melbourne Lord Mayor Sally Capp said the city was seeking to capitalise on the drop in demand, with a new scheme to waive stamp duty on many of the unsold apartments for eligible buyers. 

“Right now, you can buy a home in the city without having to pay a cent of stamp duty,” Capp said.

“The median price of units in Melbourne has fallen 7.5% in the past year, while the average time properties are on the market has jumped by 24% compared to pre-COVID levels across the CBD, Docklands and Southbank,” she said.

In New South Wales, major regional hubs saw growing demand, including Wollongong, Orange and Dubbo. 

Enquiries for units in Wollongong rounded out the top five most-enquired about suburbs. 

Michelle May, a buyers agent in Sydney’s eastern suburbs and inner west, told Business Insider Australia that interest by first home buyers in properties in Wollongong, for example, indicated that the shift to lifestyle areas was not limited to those established in the housing market.

“I think there’s going to be a continued emphasis on the multifunctionality of the property,” May said, pointing to properties with space that could be converted into a home study, NBN access, and access to green space nearby. 

May said the findings aligned with her experience working with prospective buyers in recent months in Sydney, who had been frozen out as prices continued to rise while they were house hunting.

“It was a rude awakening that they could no longer afford it,” May said. “So they’re venturing further south and further west, to get what they want.” 

Similarly, as the Australian Prudential Regulation Authority (APRA) raised the buffer on mortgage lending in October 2021 by half a percentage point — meaning those seeking a mortgage at the average July 2021 interest rate of 2.32% need to prove they can continue their repayments should rates rise 5.32% rather than 4.82% — some buyers were caught out. 

May said she had one client who settled just before Christmas who was squeezed by the macroprudential changes. 

“Literally in a matter of five weeks, the bank turned around and said to her: ‘whatever interest rates that we were going to offer you is no longer the case’,” she said.

However the combined factors of a move to remote work accelerated by ongoing lockdowns and restrictions and affordability crunches had helped many first home buyers consider the benefits of suburbs that might have previously been outside their consideration. 

“By the same token, there are people I’ve spoken to [who have] said, ‘oh, actually, we’ve now decided to move to Orange or Newcastle’; the more regional areas because they’ve realised that that is actually now a viable option,” May said.

Amid projections the country’s red hot property market would cool somewhat in 2022, May said ongoing restrictions on lending by APRA, along with the potential for an earlier-than-expected cash rate hike by the RBA would continue to impact affordability for first-time buyers in 2022. 

“People are just simply not going to be able to borrow what they were able to borrow before Christmas,” she said.