In recent years, with continuous house price escalations and reduced borrowing capacity, purchasing a home has become increasingly challenging. The latest analyses indicate that many individuals are shifting towards more affordable housing options.

According to the affordability report published by PropTrack, housing affordability has now reached its lowest level in thirty years.

During the pandemic, unprecedented price increases occurred, compounded by frequent rate hikes since mid-2022, making the market environment extremely challenging.

Household borrowing capacity has decreased by 34% compared to the historically low rates of 2020-21, meaning people now have more limited housing choices they can afford.

House prices have risen for 17 consecutive months to new highs, requiring homebuyers to pay higher monthly installments and save longer for purchasing a home. Will this lead more homebuyers to seek more affordable housing?

Analyses show that since the rise in interest rates, lower-priced properties have seen more significant value appreciation. For instance, since May 2022, the Reserve Bank of Australia has raised the cash rate from a historic low of 0.1% to 4.35%.

During this period, homes in the 25th percentile increased in value by 13%, compared to a 3% increase for homes in the 75th percentile.

Considering the relationship between demand and price growth, coupled with current supply shortages, there is greater demand among homebuyers for lower-priced properties.

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Although the situation may vary in major cities, the overall trend indicates a preference among homebuyers for lower-priced properties.

In high-priced cities, this trend may not be as pronounced. For example, in Sydney, price growth has not significantly differed among various areas, indicating a uniform market demand.

In contrast, in Melbourne, areas with higher median prices often perform better, highlighting the popularity of the high-end market among homebuyers.

Nevertheless, lower-priced properties continue to attract widespread interest. This trend is evident not only nationally but also prominently in capital cities.

For instance, in smaller capital cities, homebuyers tend to favor affordable housing options, which may drive growth in lower-priced urban areas.

According to data from the Australian Bureau of Statistics, regions like Mandurah, Adelaide North, and Ipswich have shown higher house price growth rates compared to median price areas in cities like Perth, Adelaide, and Brisbane.

However, not every city follows the same pattern. In some areas, the most significant house price increases often occur in lower-priced regions, while in other cities, the opposite may be true.