February 25 2022
"Homeowners naturally value their space!" - Marco Zande, Strategy Executive.
Ongoing demand for more space has seen the difference in price between houses and units accelerate with the gap now at a record high.
According to CoreLogic’s new monthly Unit Market Update, the disparity between Australia’s house and unit values reached 28.3 per cent in January – the highest ever level.
Property prices across the country have seen the highest growth rates since 1989, however, units have increased only 14.3 per cent in the 12 months to January while house values rose 24.8 per cent.
Report author and CoreLogic Research Analyst Kaytlin Ezzy said houses do typically outpace units, however, the difference is not normally so large.
“The annual performance gap between houses and units began to narrow in the final three months of last year, in part due to the lifting of lockdowns and border restrictions as well as increasing affordability constraints diverting demand towards the medium to high-density sector,” Ms Ezzy said.
“However, in January we saw that annual performance gap start to widen again, which could, in part, be explained by the disparity between advertised house and unit supply.
“Shortages in advertised listings throughout COVID-19 has helped fuel value growth by creating a sense of urgency among buyers.”
While unit values have continued to underperform, things are starting to change in some capital cities. Canberra (5.6 per cent) Darwin (2.6 per cent), regional Victoria (5.7 per cent) and regional Tasmania (9.2 per cent) all recorded stronger unit growth over the last quarter compared to houses.
Hobart’s unit market has been the strongest performer in the past 12 months, with median prices up 32.8 per cent over the year compared to a 26.3 per cent capital gain for houses.
Sydney’s unit values have also risen sharply, up 15.4 per cent, taking the median price to $837,640 which is the highest in the country.
Similar to recent house price growth, Adelaide led the pace for unit gains last month, recording a monthly rise of 1.5 per cent followed by Brisbane (1.4 per cent). Unlike the other capital city unit markets around the country, Brisbane and Adelaide are yet to show signs of a slowdown.
Listings are also starting to increase nationally, however, total advertised unit supply in Australia’s combined capital cities was down 3.7 per cent compared to the same time last year and 7.8 per cent below the previous five-year average.
Over the same period, capital city house listings were down 12.5 per cent compared to this time last year and 32.7 per cent below the five-year average.
Ms Ezzy said unit markets could see increased demand this year, despite the likelihood of interest rates rising.
“Three of the eight capital cities now have a median house price in excess of $1 million and the gap between national house and unit values is at an all-time high,” she said.
“It is likely affordability constraints will gradually pull some demand away from houses towards more affordable units and with international borders opening this month, Australia may gradually see a return to pre-COVID levels of migration.
“As most migrants initially rent in Sydney or Melbourne this could help bolster rental demand in those markets hardest hit by the pandemic, which, in turn, could boost investor demand and ultimately, unit prices.”
Source: Elite Agent