If the double-digit annual growth rates for both houses and units wasn’t striking enough, the widening gap between the two has reached a record high of 23.8%, according to CoreLogic.
In the 12 months to January, house values increased by 24.8%, while units increased by 14.3%. Combining the two translates to the highest annual dwelling growth rate since 1989.
Kaytlin Ezzy, report author and research analyst at CoreLogic, said house growth has outpaced unit growth over the past decade, exacerbated by the shock of the pandemic. Results only began to narrow in the final three months of 2021, particularly in regional Tasmania, Canberra and regional Victoria, due to the eased local and international restrictions.
Across combined capital cities, unit gains were also substantial in Brisbane and Adelaide, showing improved momentum, at 13.8% and 9.5% in the 12 months to January, respectively. Hobart was crowned best performer with median unit values at $574,993 – a 32.8% increase compared to the 26.3% increase for houses.
Aspiring homebuyers have also found themselves turning to high-density living to work around affordability constraints.
“However, in January we saw that annual performance gap start to widen again, which could, in part, be explained by the disparity between advertised house and unit supply,” Ezzy said. “Shortages in advertised listings throughout COVID has helped fuel value growth by creating a sense of urgency among buyers.”
The situation could take a turn for the worse after the total advertised unit supply in combined capital cities fell 3.7% in January 2022 compared to the same time in 2021 – 7.8% below the previous five-year average.
Ultimately, the unit market is likely to benefit from some tailwinds, like increased inflation and rate hikes, since three of the eight capital cities have a median house price over $1 million.
“It is likely affordability constraints will gradually pull some demand away from houses towards more affordable units and with international borders opening this month, Australia may gradually see a return to pre-COVID levels of migration,” Ezzy said. “As most migrants initially rent in Sydney or Melbourne this could help bolster rental demand in those markets hardest hit by the pandemic, which, in turn, could boost investor demand and ultimately, unit prices.”
