Chief Economist update: Australia’s next $1 million and $2 million suburbs

November 20, 2020


Chief Economist update: Australia’s next $1 million and $2 million suburbs

November 20, 2020

Cracking the $1 million and $2 million median house price barrier in the middle of a pandemic is quite a milestone.

Interestingly, this next $1 million and $2 million suburbs list also features suburbs from outside of Melbourne and Sydney.

Pascoe Vale South’s median price is approaching the $1 million mark.
Picture: realestate.com.au

Hitting a $1 million median in Melbourne and Sydney no longer indicates a premium suburb, in fact, the suburbs are more likely to be mid-market. Melbourne’s Oakleigh East is just under $1 million, while Pascoe Vale South and Eltham aren’t too far off. In Sydney, Cecil Hills is almost 40km west of the Sydney CBD, while Glenbrook is 70km west.

The surprising new entries on the list are Lennox Head in Ballina, highlighting the strength of the Northern NSW corridor. On the Sunshine Coast, Moffat Beach is about to hit $1 million while Sunshine Beach is set to hit the $2 million mark. Surfers Paradise is also about to hit $2 million. Perth is showing strength with Mount Lawley and South Fremantle about to get to $1 million pricing.

Regional Australia and premium property have been positive stories during COVID-19, and this list further demonstrates those two trends. It is also another sign that the Perth market is recovering, while Northern NSW, Gold Coast and Sunshine Coast continue to gain in popularity and remain strong property performers.

The biggest takeaway from this list, is that property prices across Australia continue to climb.

How spending habits changed during COVID-19

For many Australians, COVID-19 has been good news for their bank balance. Australia’s household saving ratio has rocketed up from 6% of household incomes to 20%. If you are fortunate enough to have a job, you are probably not spending much.

So little demand has meant very little pressure on pricing and as a result, Australia’s CPI dropped in the June quarter. With demand so weak, there continues to be pressure on the RBA to reduce the cash rate even further from the record low 0.25%. As discussed last week, negative interest rates are again on the agenda globally – if you want people to borrow more to spend and invest, there is possibly no better incentive than to pay them to borrow money.

While we did have negative inflation, there were some categories that dominated the decline. Childcare dropped by 95% due to it being provided for free early on in the pandemic. Fuel prices dropped, primarily because of a price war between Russia and Saudi Arabia, as well as a sharp decline in usage. Electricity prices also dropped as the closure of offices, shops and factories put a hand break on demand.

Curiously, footwear and clothing for men dropped off the back of low demand, whereas for women, it increased overall with perhaps Lululemon and PE Nation not being all that much cheaper than normal work wear.

The prices that increased were not surprisingly cleaning and maintenance products with toilet paper and hand sanitiser going off the charts in terms of demand and sharp rises in pricing. Similarly, ‘other non-durable household products’ includes all those implements to clean with – brooms and mops for example.

Being stuck at home created high demand for furniture and our eating habits seemed to show greater demand for fish and ‘other cereal products’, perhaps driven by all that baking and home cooking.

Given how heavily lockdown impacted inflation figures, it is unlikely that we will see quite the same trend in the September quarter, particularly given the childcare stimulus was rolled back and petrol prices have normalised.

Inflation is likely to remain low but the arrival of a COVID-19 vaccine, combined with very cheap and easy finance and record levels of government stimulus could provide an adrenaline shot to the economy and lead to a surge in inflation.

Source: realestate.com.au