Borrowers looking to get their feet on the property market ladder should be looking to units, not houses, if new data is to be taken into account.
The difference between house and unit values is widening across Australia’s capital cities, and houses are now recording far greater value growth than units.
A RP Data Property Pulse report shows that at the end of the first quarter of this year, combined capital city house values were 28% higher than those for combined capital city unit values.
For the past 12 months, house values increased by 10.7% compared to a 9.4% rise in unit values.
“The faster rate of value growth for houses is likely to result in a growing differential between house and unit values,” RP Data economist Cameron Kusher said.
House values are higher than unit values in Canberra by 46%, Sydney and Melbourne by 40%, Darwin by34%, Brisbane by 27%, Adelaide by 31%, Perth by 23%, and Hobart (12%).
Kusher was not surprised at the results given the widening gap between houses and units.
“It’s no real surprise we are seeing a rapid shift to greater development of units as opposed to houses.”
The research also shows more units have been approved for construction than houses in Sydney, Melbourne, Brisbane, Darwin and Canberra.
However, more houses sell each year than the more affordable alternative – units.
While many people aspire to living in desirable inner city areas, the reality is there is a short supply of detached houses in these areas coupled with plenty of demand. As a result many will never be able to meet these aspirations, Kusher said.
The alternative is to look to the unit market where the cost is still going to be comparatively high but is generally significantly lower than that of a detached house, he said.
Of the top five areas surveyed by RP Data in each capital city, Pepper
mint Grove on the banks of the Swan River in Perth holds the greatest differential between capital city unit and house values – house values are 687%, or almost seven times, more expensive than unit values in the suburb.
Centennial Park in Sydney’s eastern suburbs followed with a 523% difference then the upmarket suburb of Toorak in Melbourne’s inner city at 283%.
Adelaide’s Toorak Gardens recorded a difference of 280%, while Ascot in Brisbane recorded 236%.