Unit price growth trumped that achieved by houses in nearly a quarter of all Sydney suburbs analysed. Sam Mooy
Growth in unit values jumped higher than that of houses across 39 per cent of all suburbs nationwide over the past three months as demand shifted towards the affordable segment of the market in response to increases in interest rates and the cost of living, data from CoreLogic shows.
Unit price growth trumped that achieved by houses in nearly a quarter of all Sydney suburbs analysed, and outperformed house price growth in more than a third of all Melbourne suburbs.
Tim Lawless, CoreLogic research director, said the share of suburbs where units had beaten houses could widen in the coming months.
“It’s pretty clear there’s been a shift towards apartments, which are now starting to get a larger share of the market as such for stronger capital gains as well compared to houses,” Mr Lawless said.
“Even though houses are still broadly outperforming units, that’s starting to shift, and I think this trend will continue as affordability worsens.”
Across Brisbane, the rate of growth for capital gains made on units outpaced that of houses in more than two-fifths of all Brisbane suburbs and in more than half of all Perth suburbs.
Mr Lawless said the more affordable price points across the unit sector and the expectations of persistently low supply would provide some support for unit values as interest rates marched higher.
“I think if we do see more households coming under financial pressure due to higher interest rates and cost of living, that probably will skew some demand towards units,” he said.
“I think more people, particularly first-home buyers looking to exit the rental market, are quite attracted to the medium to high density sector because of the more affordable price points.
“At the same time, the medium to high density sector is undersupplied, and it looks like it’s going to get worse over the next couple of years because we’re not seeing the early stages of a supply response and approvals just yet.”
Units in Sydney’s eastern suburbs, inner west and the Sutherland district posted some of the fastest price increases compared with houses in the past three months.
Little Bay units rose more than three times faster than houses at 8.8 per cent compared with 2.4 per cent for houses. In Kensington, units rose nearly twice as fast at 6.9 per cent, and three times higher at 4.4 per cent in Concord West.
Across Melbourne, units in Altona, Altona South and Newport have exceeded house price growth by more than tenfold, after rising 7.5 per cent, 7.1 per cent and 7.3 per cent respectively. During the same period, house prices in these suburbs fell between 0.6 per cent and 1 per cent.
Large disparity in prices
In Brisbane, unit prices in Kooralbyn in the Logan-Beaudesert area rose more than 11 times faster than houses at 10.9 per cent, and by more than tenfold in Paddington at 2.8 per cent.
“Units didn’t perform as well as houses throughout the course of 2021 and the start of 2022, so there’s already relatively good value built in them,” said Thomas McGlynn, BresicWhitney chief executive.
“The disparity between prices for houses and apartments is still very large, and I think that that’s going to drive interest to apartments for people that might be thinking that they’re not getting value for money out of a detached home purchase.”
The gap between house and unit prices blew out to a record 32.9 per cent in July last year, although it has narrowed during the recent downturn to 27.5 per cent as of May, according to CoreLogic.
In dollar terms, the median house value is about $165,600 higher than the median unit value nationally, down from a recent record high of $202,400 in July last year.
However, the gap between the house and unit value remains substantially wider compared with pre-COVID times when the average difference between the median house and unit value over the 10 years before COVID-19 struck was just 7.8 per cent.
Sydney has the highest premium of houses over units at 62.1 per cent or $495,700, although this was lower than the $586,400 recorded in April last year.
In Melbourne, houses fetch a 52.7 per cent premium over units; houses in Brisbane and the ACT are 57 per cent more expensive than units.
Sydney-based buyer’s agent and property investor Jack Henderson of Henderson Advocacy said that despite the higher house premiums, demand for detached homes remained high among his clients. However, he had been buying more apartments than houses for them.
“Majority of our buyers across our offices in Sydney, Brisbane, Melbourne and Newcastle still want houses because they want their own patch of land,” Mr Henderson said.
“But I’m a huge buyer of apartments, mostly in Sydney because many people want convenience over space, and units are much cheaper than houses, so I think apartments are totally fine if they’re in a marketplace where a lot of buyers want to live in apartments.”
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