Number of million-dollar suburbs soars in wake of housing boom

Turns out a million dollars doesn't buy you exclusivity anymore. Data from real estate research firm CoreLogic shows the number of suburbs where homes command a median price of at least $1 million has surged in the wake of the four-year long housing boom

There were 613 million-dollar suburbs across Australia by the end of June, 29 per cent more than a year earlier as declining interest rates and demand from property investors pushed up prices, according to a CoreLogic report that was published on Thursday.

"The data highlights the bracket creep that has occurred over the housing growth cycle, and how housing affordability in New South Wales (Sydney) and to a lesser degree Victoria (Melbourne) has deteriorated," Cameron Kusher, a research analyst at CoreLogic, said in the report.

Home prices nationwide have soared almost 40 per cent from a low in May 2012, underpinned by investors, who faced with low returns from other asset classes such as shares and bonds took advantage of record low interest rates and a favourable tax system for property investors.

The report highlights:

• NSW has just over 68 per cent of all national suburbs with a median home value of at least $1 million, up from 60 per cent in 2008
• Victoria increased its proportion of million-dollar suburbs to almost 17 per cent from about 14 per cent in 2008
• The proportion for Queensland and WA declined as the end of the mining investment boom depressed home prices in those states

Surging prices have hurt housing affordability and prompted banks to tighten lending criteria, with the pace of price growth moderating this year. Still, mortgage rates at the lowest in more than five decades are seen supporting demand going forward, helped by the RBA's move to cut rates to a record 1. 5 per cent on Tuesday, even as only about half of which is being passed on by the big four banks to their mortgage customers. 

"While overall housing demand may be slowing a little, we expect that with historic low interest rates, demand for premium housing is set to remain buoyant over the coming year," Kusher said. He said that he expects even more suburbs to surpass the psychological $1 million mark over the next 12 months.

Bloomberg