{"id":38285,"date":"2022-04-28T09:10:42","date_gmt":"2022-04-27T21:10:42","guid":{"rendered":"https:\/\/propertynoise.co.nz\/au\/?p=38285"},"modified":"2022-04-28T09:10:42","modified_gmt":"2022-04-27T21:10:42","slug":"units-closing-gap-on-houses-shaping-as-investor-preference","status":"publish","type":"post","link":"https:\/\/propertynoise.co.nz\/au\/units-closing-gap-on-houses-shaping-as-investor-preference\/","title":{"rendered":"Units closing gap on houses, shaping as investor preference"},"content":{"rendered":"

PHOTO: CoreLogic’s monthly\u00a0Unit Market Update<\/em>\u00a0showed the annual performance gap between houses and units<\/strong><\/p>\n

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Over the past year, national house price growth has outstripped the pace of unit prices but with both markets levelling out, that gap in performance is narrowing.<\/p>\n

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House and unit prices rose again in March, and in the first quarter of 2022, but the pace of growth is slowing and it is house prices that are coming off the boil the quickest.<\/p>\n

CoreLogic’s monthly\u00a0Unit Market Update<\/em>\u00a0showed the annual performance gap between houses and units fell to 8.7 per cent in March, as both markets slipped further from their peak rate of growth recorded in January.<\/p>\n

Since reaching a cyclical peak in May 2021, the pace of quarterly house growth has recorded a 4.9 percentage point fall, compared to a 3.8 percentage point fall for unit quarterly growth.<\/p>\n

Rolling annual growth rate, National houses and units<\/strong><\/p>\n

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The engine rooms of the country\u2019s continued spell in positive territory were Queensland and\u00a0South Australia, with Perth showing signs of being a late arrival to the party.<\/p>\n

Brisbane<\/a> continues to be the standout performer\u00a0among the capital city unit markets,\u00a0recording in March a new cyclical high in monthly (1.6 per cent), quarterly (4.6 per cent) and annual growth rates (15.1 per cent). The typical Brisbane unit rose\u00a0$63,000 in value over the past 12 months. Just one Brisbane suburb recorded a fall in unit values over the first quarter of the year.<\/p>\n

While\u00a0Adelaide\u00a0units continue to record strong monthly growth rates, quarterly growth appears to be slowing, decreasing from 4.4 per cent in January to 4.2 per cent over the three months to March.<\/p>\n

Perth recorded a surprise reversal in its quarterly growth trend, with the reopening of the West Australian border potentially pushing unit values 0.7 per cent higher over the three months to March. While quarterly growth has remained positive across Hobart, Darwin and Canberra, the pace of growth continued to ease over March.<\/p>\n

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Big cities declining<\/strong><\/p>\n

While the\u00a0smaller capital city and regional markets continue to surge, unit values are beginning to record quarterly declines across the more expensive cities of Sydney<\/a> (-0.6 per cent) and Melbourne (-0.2 per cent).<\/p>\n

With a median value of $833,815, the typical Sydney unit is still approximately $355,000 more than the typical Brisbane unit, and more than double the price of the average Adelaide unit.<\/p>\n

But that gap may be closing to some degree, with 51.4 per cent of Sydney\u2019s unit markets analysed in CoreLogic\u2019s\u00a0Mapping\u00a0the Market\u00a0Report<\/em>\u00a0recording a decline in values over the first quarter.<\/p>\n

Several of the largest falls were in the city\u2019s Northern Beaches region.<\/p>\n

Across Melbourne, 58.0 per cent of the unit markets analysed recorded a decline in values, with the largest value declines recorded across the inner-city markets.<\/p>\n

Units more resilient<\/strong><\/p>\n

Tim McKibbin, CEO, Real Estate Institute of NSW, said the unit market may be one to watch over coming weeks and months.<\/p>\n

\u201cHouses are still recording stronger value growth compared to units but houses have also recorded a faster deceleration in the pace of quarterly growth,\u201d he said.<\/p>\n

\u201cThis could be interpreted as relative stability in the unit market, particularly for well-located properties with access to infrastructure, jobs and amenity, but\u00a0rising residential construction costs\u00a0must be factored in, as this is changing the landscape for the development community.<\/p>\n

\u201cIn the 12 months to March costs were up 9 per cent, which is the highest annual growth rate on record outside of the introduction of the GST.<\/p>\n

\u201cThese variables all affect price but they also impact\u00a0the supply shortage\u00a0that we know is compounding.<\/p>\n

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\u201cEach year, in New South Wales we fail to build enough new homes to satisfy demand when population growth is taken into account.\u201d<\/p>\n

The investment proposition for units is becoming more favourable in terms of rental return.<\/strong><\/em><\/p><\/blockquote>\n

–\u00a0Kaytlin Ezzy, Research Analyst, CoreLogic<\/p>\n

Property values are facing more headwinds than tailwinds, according to\u00a0CoreLogic Research Analyst Kaytlin Ezzy, who said the unit segment may be more resilient relative to houses as the Australian property market inches toward the downswing phase of the cycle.<\/p>\n

\u201cHousing affordability\u00a0constraints,\u00a0rising mortgage rates\u00a0and the possibility of\u00a0a lift in the cash rate\u00a0over the next few months could see less buyer demand throughout the year, however, unit capital growth cycles have historically seen less volatility than houses and as a result the downswing in prices is expected to be less than that in the detached house segment.\u201d<\/p>\n

Units were also presenting as a more viable option for investors, according to Ms Ezzy.<\/p>\n

\u201cUnit stock is also generally more affordable relative to detached houses in the same area, and a downturn in demand may be partially offset by the fact that units are a more viable option amid housing affordability constraints.<\/p>\n

\u201cIt is clear the investment proposition for units is becoming slightly more favourable in terms of rental return.<\/p>\n

\u201cUnit\u00a0rents are currently rising\u00a0faster than capital growth and faster than detached house rents.<\/p>\n

\u201cGross rental yields seem to have bottomed out in some cities and are now rising.<\/p>\n

\u201cThis may at least in part be due to relaxed restrictions around international travel earlier this year, where overseas arrivals tend to be renters, and tend to be concentrated in densely populated parts of cities.\u201d<\/p>\n<\/div>\n<\/div>\n<\/section>\n

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