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Apartments are holding their value better than houses, according to PropTrack’s Home Price Index data, while the price gap between the two sectors is also narrowing.
Units now look to be having their moment in the sun, holding up much better against rapidly rising interest rates than houses. For many people, an apartment is a more affordable and desirable alternative to the great Australian dream. Obviously this depends on financial circumstances, lifestyle and plans for the future.
Eleanor Creagh, a senior economist at REA Group, said after spending years in the shadow of extraordinary house price growth, apartment buying was now in the spotlight. As a result of the pandemic, the premium people paid for houses greatly accelerated.
“According to PropTrack’s Home Price Index, house prices have fallen by 3.6 per cent nationally since March, whereas the decline in unit prices has been less pronounced, down 2.6 per cent from the February peak,” she said. CoreLogic economist Kaytlin Ezzy agreed. “Units are relatively more affordable and attract strong investor activity,” Ms Ezzy said.
Holding up
“Typically, houses command a premium over units, but this two-speed market drove a record extreme in the price gap between houses and units,” Ms Creagh said. “But that’s now beginning to narrow as the apartment market holds up better. In fact, house prices are falling almost twice as fast.”
Apartment living can mean less general maintenance, potentially being closer to work, public transport, and cafes, restaurants and bars. Some apartment developments feature sought-after amenities such as gymnasiums, pools, rooftop terraces and more.
For buyers, it’s the increasing borrowing costs and reduced borrowing capacity that are combining to buoy demand for apartments thanks to the better value they offer.
“Affordability constraints, shrinking budgets, and the value units offer are all helping to prevent apartment buyer demand from falling as fast,” Ms. Creagh said.
Choices
“The cheaper price point of units provides a more accessible entry to the market, and if the proposed Help to Buy scheme is implemented, there will be a lot more choice under the proposed price caps in the apartment market. The same is also true for the extended Home Guarantee scheme.”
The median unit price over the last year was $1,015,000 in Castle Hill, NSW. Based on five years of sales, Castle Hill has seen a compound growth rate of 6.8 per cent for units. The suburb, northwest of Sydney’s CBD, features Toplace Group’s Phoenix, Hydra & Vela apartment buildings.
In the Sydney suburb of Rosebery is Toplace Group’s Jolyn Place development, the median unit price over the last year was $852,500. Based on five years of sales, Rosebery has seen a compound growth rate of 0.3 per cent for units.
Toplace Group’s Botany NSW development, Pemberton on the Park, saw the median unit price over the last year was $890,000. Based on five years of sales. Botany overall has seen a compound growth rate of 4.7 per cent for units.