How the pandemic created a chasm between house and unit values

Though buyers have typically always been prepared to pay a premium for houses, and they have historically recorded a higher rate of capital gain, the accelerated value growth for houses is still somewhat unexpected, though market watchers are aware the writing is on the wall.

CoreLogic’s Tim Lawless explained that the house premium has risen sharply through the pandemic upswing as Australians seek out space and find greater freedom to live further away from CBDs.

“While we saw the premium contract through the early part of the rate hiking cycle as house values fell more than unit values, across the combined capitals the gap between house and unit values has since rebounded to a new record high as house values once again rise at a faster pace than units,” he said.

But while much of life has returned to normal, it’s clear that the pandemic kicked off a lifestyle shift that is impacting preferences to this day. From the beginning of the pandemic to January 2024, capital city house values have increased by 33.9 per cent or by $239,000, while unit values have risen 11.2 per cent or $65,235.

Even in a stabilising market, the difference is apparent. Over the past 12 months, capital house values have risen 11 per cent while units have achieved a more modest growth of 6.9 per cent.

Sydney leads the charge for house prices streaking away from unit values.

Since the pandemic, the NSW capital has seen the gap between house and unit values widen by almost 36 percentage points. Melbourne, Perth, Adelaide and Brisbane have all achieved similar growth around 15 to 16 percentage points. Darwin, meanwhile, has seen its house premium reduce by 12.2 percentage points.

Where the gap is widest

Sydney suburbs also take the cake for the largest difference in house to unit values, with five of 10 highest house premiums located in the harbour city. A further three could be found in Melbourne, while two are in Perth.

The top 10 suburbs with the biggest house premiums are:

Bellevue Hill, NSW - 525.70 per cent
Vaucluse, NSW - 499.80 per cent
Mosman Park, WA - 431.30 per cent
Strathfield, NSW - 389.70 per cent
Wembley, WA - 378.60 per cent
Armadale, Vic - 372.70 per cent
Hawthorn, Vic - 354.70 per cent
Carlton, Vic - 342.20 per cent
Greenwich, Vic - 322.90 per cent
Mosman, NSW - 315.50 per cent

In light of these figures, Mr Lawless commented that houses have moved out of reach for a growing portion of the population, “especially those seeking a first home or lower income households”.

He expects interest in medium- to high-density housing options to increase not only due to their relative affordability, but also because of nearby lifestyle factors such as transport networks, major working nodes and high amenity precincts. This might in turn impact the gap as unit living becomes more common and options in that segment grow to suit a range of needs.

“With housing affordability remaining a key challenge across Australia, the substantially lower price points across the medium- to high-density sector are likely to become increasingly in demand as buyers become more willing to sacrifice space for proximity to essential amenities,” he added.

Tags:

• Latest

Share