Lightning speed: How home prices have boomed in the past five years

While home prices in many affordable suburbs have shot up most rapidly, homeowners in pricier areas have enjoyed the biggest equity gains of all.

Five years ago, the pandemic had just begun and as the world locked down, the property market went quiet. But what followed was the most rapid home-price boom in history.

Use the interactive to see how values in your suburb changed in the past five years:

“When interest rates were slashed in 2020, that set off the fastest episode of home-price growth that Australia has ever seen,” said REA Group senior economist Anne Flaherty.

With rate cuts allowing people to borrow more, buyers with inflated budgets increasingly sought out suburbs where they could prioritise their lifestyle.

“We saw a big shift in what Australians value in the homes they’re looking for,” Ms Flaherty said.

“The suburbs that outperformed overwhelmingly were those in scenic lifestyle areas.”

Suburbs where buyers could find bigger homes on larger blocks in areas with close proximity to the coast or natural landscapes experienced a surge in demand. Remote working unlocked areas further from capitals for city buyers.

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“Even post-pandemic, we’re still seeing more people put more focus on homes in areas with a great lifestyle and access to green space or the ocean,” Ms Flaherty said.

The huge uplift in prices in the most desirable pockets of Australia, and the surge in interest rates that came in 2022 meant many buyers shifted focus to more affordable areas.

“Because home prices have increased so much, more buyers are being locked out of a great number of suburbs,” Ms Flaherty said. 

“What that’s done is created an outperformance in Australia’s most affordable areas.”

Affordable suburbs surge as borrowing costs rise

As interest rates increased and borrowing capacities plummeted, prices boomed in previously overlooked suburbs where cheaper homes were targeted by first-home buyers and investors.

Prices also jumped rapidly in the rural Queensland towns of Monto and Murgon, where buyers can find plenty of options for less than $400,000.

In many areas, population growth amid a housing shortage put pressure on rental prices, catching the attention of investors who swooped in to buy affordable properties with high rental yields and strong growth prospects.

Unit prices jumped quickly in Armadale in Perth’s southeast, as well as Cable Beach, part of Broome in the WA’s Kimberley region, and South Hedland in the state’s Pilbara region.

A handful of affordable suburbs in Brisbane’s south, including Woodridge, Loganlea, Eagleby and Browns Plains all recorded some of the nation’s most rapid unit-price growth.

Units in Woodridge could be purchased for about $170,000 in 2020, but the median price is now $410,000.

Interest-rate rises had put these affordable suburbs on the map for new waves of buyers, said real estate agent and auctioneer Ramin Bay of Ray White Logan City. 

“Since interest rates started going up and peaked, that’s when Woodridge started to go up really fast,” he said. “It’s on the radar for both homebuyers and investors.”

Ms Flaherty said not enough homes had been built to house Brisbane’s growing population, and the rise in house prices had pushed more people towards apartments.

“Population growth is very much exceeding new supply in Brisbane,” she said. 

“People being priced out of buying houses has led to a relative increase in demand for units,” she said.

Priciest suburbs record the biggest growth in values

While the fastest price rises have occurred in some of the most affordable pockets of Australia, the homeowners who experienced the largest uplift in home values remain those who reside in some of Australia’s priciest suburbs.

Price growth in these premium suburbs – most of which were close to beaches or rivers – typically outpaced the wider market, with demand from cashed-up upgraders further increasing already high valuations.

The suburbs where values rose the most in dollar terms were concentrated in Sydney’s affluent eastern suburbs and lower north shore, led by Bellevue Hill where the median house price sits at $8.8 million, having risen by $2.86 million in the past five years.

House prices rose almost as much in nearby Vaucluse (up $2.855m), while Rose Bay, Bronte, Mosman and Northbridge weren’t far behind.

In Surfers Paradise on the Gold Coast, the median house price more than doubled to $4 million, with a typical home now worth $2.2 million more than in 2020.

The biggest price rises over the past five years have occurred in pricier suburbs, such as Surfers Paradise where house prices more than doubled since the pandemic. Picture: realestate.com.au/sold

Gold Coast real estate agent Michael Kollosche said much of the outperformance of Surfers Paradise was due to effect of cashed-up buyers, who were less sensitive to interest rate rises.

"The Broadbeach, Surfers Paradise and Main Beach markets have been extremely strong for both apartments and houses,” he said.

“A lot of it has been due to the increases in net migration along with an ageing population selling out of Sydney, Melbourne and southern markets.”

“There's a limited amount of supply in the central Gold Coast so that in itself is driving the market.”

Suburbs of both the Gold Coast and Sunshine Coast recorded some of the biggest gains in the unit market, including Noosa Heads where median unit prices doubled to $1.875 million and Main Beach where typical apartments are worth almost $700,000 more than five years ago.

Ms Flaherty said the data showed that while price growth was more rapid in affordable areas, pricier established suburbs were where homeowners reaped the largest equity gains.

“People who are benefitting the most in the market remain those who own property in the higher end,” she said.

“Even though we're seeing higher percentage gains at the lower end, in terms of dollar value gains, they are still falling well short of what we are seeing for people who own homes in more expensive suburbs.”

It’s now tougher than ever to buy a home

The data highlights the growing gulf between the buying power of those who already own property and first-home buyers trying to enter the market.

While established homeowners who are less sensitive to interest rates have been able to upgrade to larger homes thanks to substantial equity gains over the past few years, many first-home buyers have been forced to search further afield due to diminished borrowing power and rising prices.

The combined effect of rising prices, high interest rates and inflation mean first-home buyers today are grappling with the worst level of housing affordability on record.

“High interest rates have massively hit buyers’ borrowing capacities and that is particularly relevant to buyers not already in the market,” Ms Flaherty said.

“The cost of living has increased more than people's wages, meaning it takes people longer to save that deposit.”

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“That's contributed to that growing imbalance in buying capacities between those who already own a property and those who are buying their first property.”

Recent data revealed a big shortfall in the number of homes built to accomodate Australia’s growing population, with the undersupply of homes particularly acute in WA, where house prices have risen rapidly in recent years.

Housing supply and affordability remain top of mind for voters ahead of the upcoming federal election. 

The major parties have proposed a raft of measures aimed at improving the situation for buyers and renters, including policies to increase the number of homes being built and ease pressure on the housing sector by cutting migration and reducing competition from foreign buyers.

This article first appeared on realestate.com.au and has been republished with permission.