Upgraders looking to move from apartments to houses are meeting affordability hurdles with house prices growing at significantly higher rates than of units.
House prices across Australia have jumped by 22.9 per cent in the 12 months to September, compared to just a 12 per cent lift in unit values.
Recently, there has been a strong shift from home buyers looking to move from apartments into freestanding homes, particularly as people can now work from home and desire more space.
The rapid increase in house prices has meant, that certain segments of the market who might have traditionally looked to upgrade from a unit into a home, like young couples wanting to start a family, are now struggling to do so.
CoreLogic‘s Head of Research Australia, Eliza Owen, believes many people have been caught out by the market surge.
“Rapid growth in Australian housing values and rents over the past year has contributed to greater affordability pressures for households,” she said.
“With Australian dwelling values rising 20.3 per cent in the year to September, some recent home sellers have found it difficult to re-enter the market once they have sold.
“The situation poses a particular barrier for those looking to upgrade from apartments to houses.”
Ms Owen notes that the gap between units and houses continues to grow.
“The gap between median house and unit values continued to trend at record highs through September 2021, with typical capital city house values sitting 34.4 per cent higher than unit values.”
“The trend is most startling in Mosman Park in Perth, where the median unit value would account for just 21.4 per cent of the standard house value – in other words, the full value of a unit in the LGA would be a little more than a standard house deposit in the same region.
“Similarly low ratios could be seen across Strathfield in Sydney, where unit values account for just 23 per cent of house values, and Mosman, at 24.5 per cent.”
Ms Owen said demand will likely return to the more affordable unit segment of the market over time.
“Looking forward, we could see unit purchases becoming more popular as demand is deflected away from houses simply due to affordability constraints becoming more pressing across the detached housing sector where values have risen substantially more than units,” she said.
“Also, with investment activity picking up, interest in medium to high density styles of housing could lift as investment demand has historically been skewed towards the unit sector.”
