Priciest city pockets might not be where you think
Analysing the change in median sale price per sqm offers insights into market dynamics, even though typical residential block sizes have remained constant over the past five years in Australia.
Given lot sizes have remained broadly consistent, insights on price paid per square metre (per sqm) isolate property value from land size, directly reflecting the change in property values, independent of land dimensions.
The most expensive capital city markets, Sydney, Brisbane, and Canberra have the most expensive house prices, but when measured by price per sqm, there are some differences in the rankings among the most expensive capitals.
Sydney remains by far the most expensive looking at both median house prices and on a per sqm basis, but Melbourne ranks second while Canberra, where houses typically sit on bigger blocks, ranks only sixth when measured by price per sqm.
The past four years have seen subdued home price growth in Melbourne, making it the weakest capital city market with respect to home price growth since the pandemic onset. This has led to Melbourne dropping back to become the fourth most expensive capital, having previously been the second most expensive with respect to median values.
However, looking at median values per sqm Melbourne remains the second most expensive capital on a price per sqm basis. This is not because block sizes have changed, but rather because the residential blocks on which houses in Melbourne are built are typically smaller.
Darwin is the cheapest, and is 30% cheaper per sqm than the second most affordable city, Hobart ($920 per sqm), demonstrating the value Darwin offers relative to other cities.
So even though house price growth has been weaker in Melbourne relative to other markets like Brisbane, Adelaide and Perth where prices have surged, given that lot sizes are typically smaller in Melbourne, the city remains the second most expensive capital based on the median value per square meter of houses in Melbourne.
Part of the reason behind the surge in values in Brisbane and Adelaide was the greater demand for larger homes and bigger blocks, which has increased the value of space, with both cities having seen the price per sqm almost doubling in the past five years.
Sydney commands a median $2,450 per sqm, up 64% over the past five years, making Sydney 53% more expensive than Melbourne in second place.
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Sydney accounts for more than 30 of the most expensive suburbs in Australia based on value per sqm, with suburbs in Melbourne like East Melbourne, Albert Park, and Middle Park just making the top 40.
Suburbs like Bellevue Hill, Vaucluse, and Dover Heights tend to have the highest median house prices, but they aren’t the most expensive when measured by price per sqm.
Vaucluse, one the most expensive suburbs to buy a home, ranks just 39th when looking at price per sqm. While Paddington, with its smaller block sizes typically less than 130sqm, has the highest median price per sqm of land at $28,000 – more than 10 times the Sydney-wide median – followed by Darlinghurst and Surry Hills.
On a per sqm basis, it makes Paddington a little over twice as expensive as Bellevue Hill, reflecting the desirability of living close to the city and the value placed on houses in these amenity-rich, lifestyle-centric locations.
Though buyers are typically paying more per sqm, the typical value of a house in Paddington is around $3.5 million, and $2.7 million in Darlinghurst, attracting broad appeal amongst buyers relative to more expensive suburbs like Bellevue Hill and Vaucluse where homes typically cost a lot more.
The lowest price per sqm in Sydney is found in suburbs with large blocks on the city’s outskirts, with prices per sqm as low as $446 in Kurrajong and $521 in Ellis Lane, though a typical house here, sitting on more than 4,000 square metres, is valued at more than $2 million.
This contrast in prices per sqm across different cities and suburbs underscores the nuanced nature of Australia's housing market. These dynamics highlight how various factors—ranging from geographical desirability to lifestyle amenities —play pivotal roles in shaping values. Moreover, the disparity in per square meter pricing between cities like Sydney and Darwin illustrates the diverse economic and housing market landscape across the country.
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