As house prices rise to record levels on the back of Australia’s COVID recovery, some home hunters are eyeing off apartments as a bargain buy.
House price rises have been outpacing unit price rises, as the gap between the two widens. However experts say the discrepancy won’t last.
According to respected real estate data provider CoreLogic, Sydney house prices have grown 2.8 per cent over the past year, while unit prices in the Harbour City have fallen 0.9 per cent over the same period.
Over the last quarter, as our economic recovery has accelerated, house prices in Sydney have gone up by 3.6 per cent, while unit prices have moved up 1 per cent.
If you are thinking of buying an apartment, now could be a great time to strike because this price difference is unlikely to last, according to the Commonwealth Bank, as housing prices currently play catch up after their slump from the record peaks of 2017.
Our real estate market is still feeling the significant effects of the pandemic. However with homebuyers looking for more affordable stock and investors shifting back to the apartment over the medium term, market prices are expected to be pushed upwards.
Australia’s biggest bank predicts unit price growth could soon outpace house price growth. CBA believes house values will rise six per cent in 2022 with unit prices predicted to grow by nine per cent in the same year.
According to CoreLogic, as our financial recovery from COVID-19 continues, there is also expected to be an increase in demand for rental properties, which will also buoy investor interest and likely force up prices.
In the longer term the return of immigration to pre-COVID levels is also likely to push up apartment values.
CoreLogic Economic analyst Tim Lawless also says the gap between house prices and unit prices is set to narrow. Again illustrating why units could be something of a bargain buy now.
Unit price growth is expected to outpace home price growth by 2022.
“A housing market trend that has persisted through the COVID period to-date is the weaker performance of unit markets relative to detached housing,” he said.
“Across CoreLogic’s combined capitals index, house values (+4.4% over the past three months) have recorded a growth rate more than three times higher than that of its unit counterparts (+1.4%).
“There are some tentative signs this trend could become less obvious, with Sydney unit values recording their first month of growth since April last year and Melbourne unit values recording their largest gain since late 2019.”
According to CoreLogic the median value of a Sydney home as of March 1 was $1,061,229, for a Sydney unit the median price was $738,254.
If you’re looking at buying a new home, please reach out to the team at Toplace and let us know how we can help you.
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