Following three rate rises and federal tax reforms, unit value growth has outpaced houses in four capital cities, as budget-stretched buyers seek more accessible properties.
New data showed that annual unit value growth has outpaced houses in four out of eight capitals, as affordability drives demand for more accessible dwellings.
Cotality’s Monthly Chart Pack showed that unit values in Perth, Brisbane, Adelaide, and Sydney have been rising faster than houses over the last 12 months to May.
According to the data, the difference has been particularly clear in Brisbane, with units achieving 21.8 per cent growth over the last year, compared to 18.6 per cent for houses.
Perth followed, achieving annual unit growth of 27.8 per cent versus 25.6 per cent for houses, while Adelaide recorded 12.8 per cent growth versus 12.2 per cent.
Meanwhile, Sydney had slightly less discrepancy between dwelling growth, seeing a 2.4 per cent rise for units and 2.2 per cent for houses.
Nationally, house growth continued to dominate, rising by 9.4 per cent over the past year, versus 6.5 per cent for units.
Cotality’s head of research, Gerard Burg, said the stronger unit growth came down to affordability, with buyers shifting their priorities following three rate rises and tax reforms.
“Even though we’ve seen Australians’ preference for the standalone house, when it’s simply beyond their reach in a lot of these locations, they’re looking for whatever property they can really get over their head,” Burg told REB.
He said much of the demand had been driven by first home buyers, who had seen 5 per cent deposit scheme price caps in some cities being relatively low compared to recent price growth.
“On the Gold Coast, there was no individual suburb in May where the median value was below the price cap, so that really speaks to that sort of affordability challenge.”
Burg said that, in Brisbane, there had been substantial growth in recent times, resulting in relatively little difference between the median unit price compared to Sydney.
“So definitely in the case of Brisbane, that inner city unit market has been very strong.”
In contrast, Burge said areas that had seen an influx of high rises at once were significantly affecting unit growth.
“I’m highlighting Melbourne, but we’ve seen pockets in the ACT, particularly around Woden Valley, with values relatively flat or declining, and Parramatta in Sydney has been a similar story as well.”
“Compared to the flow-in of new houses, units could be very volatile.”
When it came to average dwelling values, the data also showed that national annual growth moderated from a February peak of 10 per cent to 8.8 per cent in May.
Burg said that the slowing in momentum was also reflected in monthly figures, with no growth recorded over the month to May, down from the peaks of the most recent cycle in October.
“It’s gradually been that decline in demand that we’ve seen over time - at the same time, that short-term supply, in terms of the stock available, has been moving higher across the country.”
However, he said the pivotal difference was highlighted in the capital city total listings, with values declining more rapidly in Melbourne and Sydney due to above-average stock levels, and mid-tier markets having tighter markets.
“As a result, higher growth in values is still persisting,” Burg concluded.
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