It seems that upgrading to detached homes is becoming increasingly difficult. dwelling values clock their fastest annual gain since 1989.
Due to the unique market conditions created by the pandemic, sellers, tenants, and first-time buyers all face rising rents.
CoreLogic Pulse shows that unit sellers who are looking to purchase a detached home or to upgrade their home have difficulty re-entering the market because of the wide gap between house and unit prices.
The average annual increase in house prices was 22.9% for the year ending September. This is more than the 12% rise in unit prices.
These differences would result in an average house in a capital city having a higher value that units by 34.4%.
CoreLogic’s head for research Eliza Owen stated that the majority of states and territories have LGAs, or local government areas, in which the value per unit falls below 40%.
She indicated that there is a trend in these statistics: Higher prices for dwellings in particular the home segment correlate with less buying power from units.
“Many of these could be considered more ‘desirable’ housing markets, including those closer to CBDs.”
Most likely to fail are upgraders
CoreLogic reports that LGAs that have a higher supply of housing units than detached homes have greater price gaps.
This is very common in Sydney. Strathfield is an excellent example. The median unit value is only 23%, while units make up 64.6%.
Similar results can also be observed in Melbourne’s Port Phillip, where units account for more than 70%.
Port Philip units cost $31 less than the median market house value of $2.02m.
Ms Owen claimed that unit value growth has been affected by higher concentrations in unit supply.
Mosman Park, Perth is a difficult area for upgrades.
Mosman Park’s average house price is 21.4%, which accounts for just 21.4% of its overall value.
Ms Owen explained that the full value of the unit in Mosman Park is slightly less than the standard deposit for a house located in the same area.
Hobart, located in the middle all capital cities, has one of the lowest prices. However, Darwin, Brisbane and Brisbane have markets where unit prices exceed half the house prices.
Hobart’s unit market is popular among downsizers, buyers looking for a lower-maintenance option, and investors.
“The vast majority of Hobart units are owned by investors, and units may be in high demand as the short-term rental accommodation markets hold strong amid an uplift in domestic tourism,” Ms Owen said.
Kingborough’s unit-market was the most expensive in Hobart. This is despite 71% lower median housing values than units in this market.
Is the trend likely to reduce housing demand?
Ms Owen said that this trend is a concern to many upgraders, especially for those who want more space for their families.
She stated that looking at the changes in unit values over time, one can see that apartment owners are able to put less money towards a home today than they did five years ago.
However, Ms Owen said this presents an opportunity for other buyers, as cheaper units “accommodate greater socioeconomic diversity for living closer to the CBD”.
She stated that unit purchase could be more popular due to the lower demand for houses because of affordability constraints.
“With more investment activity the interest in medium- and high density housing styles could increase because unit sector investment demand has historically been skewed towards the unit sector.”