Apartment values are rising faster than those of houses in about six out of 10 suburbs nationwide as the price gap between the two categories blows out to a record 48.2 per cent, CoreLogic data shows.
A sharp decline in borrowing capacity, coupled with the recent house price gains, has consolidated the demand for units, lifting investor and first home buyer activity, said CoreLogic’s head of research, Eliza Owen.
Worsening affordability has also pushed buyers towards the cheaper segment of the housing market, where the growth in prices is running more than three times stronger than what is being achieved at the upper end.
Ms Owen said the growth in unit prices would likely continue to outperform that of houses in the foreseeable future as affordability challenged buyers.
“Most cities now have a median house value that is at least 1.5 times higher than the median unit value, so as housing affordability becomes more stretched, along with lower borrowing capacity, I won’t be surprised if the unit sector continues to outperform,” she said.
The gap between Sydney’s house and unit prices ballooned to a record 72.7 per cent, or $620,272, in July, up from 64.7 per cent a year ago, to CoreLogic said.
That difference could buy a median-priced unit in any capital city except Brisbane.
Houses in Canberra are now $401,822 more expensive than units, and are $333,837 more in Melbourne.
The gap between house and unit prices in Perth and Darwin also increased to $267,492 and $220,840 respectively.
But the price difference between units and houses has shrunk in Brisbane and Adelaide, to $327,916 and $284,180 respectively, after their unit values accelerated faster than houses in the past three months.
Brisbane units jumped by 5.8 per cent, which is 2.4 percentage points higher than houses at 3.4 per cent.
Adelaide units outperformed houses by the same amount after increasing by 7.1 per cent during the same period.
Unit prices are also rising at a faster rate than houses across Sydney, Melbourne, Perth and Hobart, but have fallen behind Darwin and the ACT where affordability pressures are less pressing.
Across the combined capital cities, unit values in 506 suburbs out of 855, rose faster than houses, with some markets gaining more than seven times more than houses.
In Sydney, units in Parramatta suburbs Telopea, Dundas and Newington topped the outperformers, with values increasing more than four times faster than homes.
Units also rose more than four times higher in desirable, but expensive suburbs such as Naremburn in the lower north shore and Bellevue Hill in the eastern suburbs.
House prices in Naremburn fell 3 per cent to $3.11 million, while units rose 1.3 per cent to $1.262 million.
While both house and unit values fell in Bellevue Hill, houses posted a sharper decline of 8.4 per cent over the past three months, compared with a 4.6 per cent drop in unit prices.
“I think affordability is finally catching up with a lot of people, so the lower borrowing capacity means they have to compromise the type and size of their homes if they want to live in their preferred location,” Ms Owen said.
“In many cases, they have no choice, particularly if the gap between houses and units is nearly $2 million, and in Bellevue Hill’s case, more than $10 million.”
In Melbourne, units also outpaced houses by more than sixfold in suburbs where the gap has widened significantly, such as in St Kilda West, Elsternwick and Murrumbeena.
In the past three months, unit values in those suburbs climbed by up to 2.7 per cent, while houses slumped by as much as 5.7 per cent.
In Brisbane, unit values in Everton Hills, Clontarf and Redcliffe rose more than five times faster than houses, and in Adelaide, unit prices lifted more than seven times higher than houses in Marden, Pooraka and Payneham.
The worsening affordability and drastically reduced borrowing capacity has also diverted demand to the lower 25 per cent of the housing market, sparking a 3.3 per cent increase in home values across the capital cities, compared with just 0.8 per cent increase in the upper end.
Sydney’s more affordable house markets such as Wiley Park, Birrong, Punchbowl and Yagoona in the inner south-west led the biggest gains in the past three months, with values lifting between 5.8 per cent and 7.2 per cent.
In Melbourne, inner suburbs Balaclava, Middle Park and South Melbourne defied the downturn, with house prices increasing by 3 per cent, 2.8 per cent and 2.7 per cent respectively.
Originally published by Nila Sweeney in the Australian Financial Review. View article online HERE.
