Sydney’s entry-level houses ‘disappear’ to just 4 per cent of the market, while Melburnians get a ‘leg up’

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A first home buyer’s chances of buying an entry-level house priced under $400,000 in Sydney halved during the past 12 months, making it the worst city for buying an entry-level home.

Melbourne buyers had it much easier, with a third of homes available under $400,000 – down from 40.8 per cent in 2015.

In the harbour city, less than 4 per cent of houses in April were advertised under $400,000, compared with 8.6 per cent of homes in 2015, Domain Group data shows. In 2012, 21.3 per cent of houses were priced under $400,000.

Domain Group chief economist Andrew Wilson said the $400,000 benchmark typically represented “the homes a first home buyer could traditionally choose from where the repayment level would be around their rent price”.

But for first home buyers in Sydney, “you won’t get much … it’s the bargain basement of the market,” Dr Wilson said.

“It’s getting tougher and tougher and homes at this price point are disappearing.”

The entry-level houses in Melbourne are in suburbs to the north and west, such as Melton, Wyndham and Whittlesea, Wakelin Property Advisory associate director Jarrod McCabe said.

Homes close to the city do come at a price point that is usually above a typical first home buyer’s budget, “which is why they look to buy in these fringe suburbs”, Mr McCabe said.

This has given Melbourne first home buyers a “leg up” on those in other capital cities, he said.

These lower-priced opportunities may also see lower-priced house hunters look beyond their city’s borders.

Curtin University’s Steven Rowley said first home buyers focus predominantly on affordability and location, which “often means moving a considerable distance from work in order to purchase, or seeking employment in areas with cheaper housing markets”.

“Net interstate migration is negative in NSW and positive in Victoria and house price differentials are part of the factors behind this,” Dr Rowley said.

Potential buyers looking interstate or at least beyond their comfort range of travel include nurses, teachers and single people, Finalytics Financial executive chairman Tim Boyle said.

“Regardless of which state they live in, they tend to earn the same amount [in these professions],” he said.

“They end up resigned to one of two things. They either look to buy an apartment or they decide to travel further …They’ve got to be prepared to spend an hour in the car [each way] every day,” he said.

First Home Buyers Australia co-founder Taj Singh said $400,000 was the average amount they had seen first home buyers spending, requiring an $80,000 deposit and costs.

This expense has seen “more and more first home buyers choosing to buy their first home [rentvesting] as an investor in places such as Melbourne CBD, the outer suburbs of Melbourne and South East Queensland”.

Sydney versus Melbourne

Houses advertised for $400,000 or under within 50 kilometres of their respective CBDs.

Sydney

28 Wangaroa Crescent, Lethbridge Park

Price: Under contract for $400,000

Size: 650 square metres , three-bedroom, one-bathroom, single garage

Last sold: 2005 for $194,950

Melbourne

2 Caruana Crescent, Melton West

Price: $395,000

Size: 509 square metres, three-bedroom, two-bathroom, double garage

Last sold: Brand new