Houses trump units in 2020, but will the trend last?
Houses triumphed over units in 2020, posting far more significant sales in a year that saw a global pandemic greatly influence consumer behaviour.
Despite strong headwinds, Australia saw 459,308 property transactions last year, with houses drawing far more attention than units, according to the latest CoreLogic Property Pulse.
Namely, for every unit sold there were 2.9 house sales in 2020, with the share of houses as a portion of total sales edging up to 74.2 per cent from 73.2 per cent a year earlier and surpassing the decade average of 70.2 per cent.
In fact, most capital cities and regions saw the portion of house sales rise when compared with the decade average, barring Adelaide, Hobart and regional South Australia.
According to CoreLogic’s head of research, Eliza Owen, this fairly consistent growth can be attributed to several factors:
1. HomeBuilder skewed demand towards houses
Since the announcement of the HomeBuilder scheme in June, new home sales increased significantly, with the December quarter up almost 100 per cent compared with December a year earlier, based on recent data from the Housing Industry Association (HIA).
Further, the Australian Bureau of Statistics (ABS) found that approvals for house builds were up 13.9 per cent over the year, while unit approvals declined by 8.6 per cent.
“The design of the scheme largely lent itself to new houses, as opposed to units. An example of this was the tight timelines for eligibility, where the commencement of a new property initially had to take place within three months of the contract date.
“This meant the take-up of the scheme was largely utilised for detached houses, rather than off-the-plan unit sales, with the latter requiring a number of purchaser commitments before the project commences,” the head researcher explained.
2. Less investors in the market means less demand for units
With investors making up most of the activity in the unit market, the decline in investor lending has led to a similar fall in unit sales.
According to Ms Owen, finance commitments for investment property purchases correlate more strongly with unit sales as “investors have historically outweighed owner-occupiers across the unit sector”.
In 2020, the average value lent to investors for the purchase of property was $5.1 billion per month, which is 22.7 per cent below the monthly average over the past decade.
“The relatively low levels of investment activity may have been compounded by weak rental markets, particularly in highly concentrated investment markets like inner-city Sydney and Melbourne, which are largely comprised of unit stock,” Ms Owen commented.
3. Price falls attracted more house buyers
Housing values bottomed out nationally over 2020, and when houses become more affordable, they may become increasingly preferable to units, the researchers said.
With house prices rising over recent months, buyers are tipped to pivot back to the unit market in their search for affordable housing.
Looking ahead
While houses may have won 2020, the new year could present some challenges for the market as the end of HomeBuilder nears and investor lending and house prices begin to recover.
Still, the general desirability of detached dwellings could help maintain the popularity of houses among buyers in 2021, as well as the recent changes in working conditions across most states and territories, Ms Owen said.
“Anecdotally, houses have offered reprieve from density during a pandemic, and remote-working arrangements have allowed people to seek relatively affordable houses in regional Australia,” Ms Owen noted.
Further, recent data showed the improvement in the investability of houses compared with units as house rents saw stronger performance than unit rents over the year.
Moving forward, “first home buyers may also continue to drive house sales, as Sydney and Melbourne house values sat -2.7 per cent and -6.5 per cent below the respective peaks as of January”, Ms Owen concluded.