Rising Costs, Shrinking Choices: Are Entry-Level Homes Becoming Less Affordable?

As cost of living pressures and higher interest rates push home buyers toward more affordable housing markets, entry-level prices are rising sharply across major Australian cities.

Based on PropTrack figures, homes priced under AU$600,000 are increasingly difficult to find, and properties under AU$400,000 are nearly disappearing in the country's five largest cities, reported News.com.

PropTrack economist Angus Moore explained that competition for cheaper homes has intensified.

"More affordable areas have tended to see faster price increases over the past two years and, with rates being higher, affordability is already the worst in decades," he said.

Some of the biggest changes are taking place in Adelaide, once considered one of Australia's most affordable housing markets. The report reveals that the number of city suburbs with an average house price below AU$500,000 has shrunk to just six, with most of these located more than 25 km north of the CBD.

In Melbourne, even though home prices have fallen in many parts of the city, entry-level prices have continued to rise. PropTrack found that less than 20 Melbourne suburbs now have median home prices below AU$600,000, which was the threshold for the state's first-home buyer assistance program.

Sydney, too, is feeling the squeeze, with only the semirural enclave of The Central Coast offering houses for under AU$600,000. Additionally, just 19 suburbs in Sydney have median unit prices under AU$500,000.

Brisbane is also seeing limited affordable options, with only three suburbs where the median house price is under AU$500,000, and five suburbs where unit prices are below AU$400,000.

Meanwhile, Perth has experienced the fastest increase in prices over the past year, with an average rise of nearly 20%. The cheapest suburb to buy a house in Perth is Brookdale, where the median house price is AU$540,000.

"There has been a similar trend all across Australia," Moore pointed out. "One of the most important drivers of housing markets is affordability. In the current environment, we are seeing more buyers looking at more affordable options. We've also seen the more affordable capitals perform better and within those capitals it's the more affordable parts that have done better. It means it's much harder for first-time buyers."