Mid-market surge in Canberra property values leaves entry-level buyers struggling

Entry-level buyers may already be feeling squeezed out of the market but when it comes to upsizing they could be feeling a greater pinch.

Falling interest rates have made the transition from tenant to homeowner more affordable as monthly mortgage repayments hit all-time lows. It is not necessarily the affordability of mortgage repayments, it is saving the lump sum deposit that most find a struggle. Many tenants are forced to move back in with relatives in order to save any spare cash for the hefty deposit.

This isn’t the only problem entry-level buyers face. The latest Allhomes data show that homes within the entry-level price bracket increased annually by 1.5 per cent to $461,850 based on sales over the first eight months of the year. This sector is defined as sales below the 40th percentile of the median price for Canberra and Queanbeyan. This was the smallest price increase of all the market sectors. The gap is widening, with any dreams of upsizing becoming even harder as the mid to upper housing sectors jump ahead.

The best performer was the mid-level market, forging ahead by 4 per cent over the year to $650,000 based on sales over the first eight months of the year. Those buyers upsizing for the first time would be feeling the pinch due to the jump in dollar value.

Buyers in the mid-level sector have fuelled this market. They are sellers who have recorded strong gains on the current property they own, keeping them in line with market performance, but they are also buyers benefiting from historically low interest rates.

The upper-level market forged ahead by 3.7 per cent to $941,000. This sector is defined as sales above the 80th percentile of the median price for Canberra and Queanbeyan. It may be a surprise that the house price within the upper market falls below the million-dollar mark. The volume of sales recording above  $1 million is a small percentage of the overall transactions. This is a far cry from Sydney, where the median house price has been hovering around $1 million.

Low interest rates have not only encouraged downsizers but also aided the affordability of those looking to upsize within the mid to upper end of the market driving the property market forward and leaving the entry-level market behind.

Nicola Powell is a property expert for Allhomes. Twitter: @DocNicolaPowell. The MIX106.3 Real Estate Show, Saturdays, 9-10am.