The price growth of apartments continues to lag rocketing house prices in many suburbs across Sydney and Melbourne, with the trend showing little signs of abating.
The widening price gap between houses and units is a long-term trend driven by land scarcity in our biggest cities, with the difference tending to be widest between houses and high-rise apartments.
While house prices in Sydney’s North Ryde soared 29 per cent in the year ended March 31, unit prices in the suburb grew by a mere 6 per cent. Similarly, prices in Homebush grew 29 per cent, compared to unit price growth of just 7 per cent.
In Sydney’s Pennant Hills, house prices grew 24 per cent, while unit prices were flat, figures from CoreLogic show.
It is the same story in many parts of Melbourne, with Essendon North house prices growing by 19 per cent over the same period, while apartment prices fell by almost 1 per cent.
Houses in Melbourne’s Canterbury saw their prices jump more than 14 per cent, while units dipped 4 per cent. In inner-city Hawthorn East, houses were up 9.6 per cent, compared to a 6 per cent fall in unit prices.
Earlier analysis by CoreLogic showed more expensive property markets, particularly those close to CBDs and in areas where there are high numbers of units relative to houses, tend to have the biggest price gaps.
Eliza Owen, head of research at CoreLogic, says one of the reasons for the relative recent poor price performance of unit markets is COVID-19 related travel restrictions, including the closure of Australia’s international borders.
Demand for investment units in urbanised centres likely fell because of their high exposure to migrants and international students.
During the height of the pandemic, many units were empty, particularly in inner Melbourne.
The re-opening of international borders is seeing arrivals from overseas rising quickly, which should help to support the prices of units in both Sydney and Melbourne, she says.
However, Owen says one area of concern remains the prospect of higher mortgage interest rates, with prices of investment units more sensitive to rate movements than houses.
Many analysts expect the Reserve Bank of Australia to start increasing official interest rates this year, possible as early as June, with lenders expected to pass on any hikes in their variable rate mortgages.
Following two years of surging property prices, the big gains made over the past year appear to be over.
Sydney house prices were 0.1 per cent lower in March after being flat in February. Unit prices were 0.5 per cent lower in March and 0.3 per cent lower in February.
In Melbourne, house prices down 0.2 per cent lower in March, following flat prices February. Unit prices were 0.2 per cent higher in March and 0.1 per cent higher in February. However, those small gains came after big falls in inner-city unit property values during COVID-19 restrictions.
Coming off the back of strong annual growth, falling affordability continues to be a key factor affecting property market conditions.
A surge in the cost of living and rising rents is restricting the ability of prospective homeowners to save and borrow.
In last month’s federal budget, the government expanded the number of places available in its low-deposit scheme.
The program allows first-home buyers, and others, to buy new or existing dwellings with a deposit of only 5 per cent, instead of the usual 20 per cent that is needed to avoid paying expensive lenders’ mortgage insurance.
Article Source: www.brisbanetimes.com.au
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