Across the combined capital cities the differential between house and unit values has been much greater but is starting to widen once again as house value growth outpaces that of units.
As at the end of the first quarter of 2014, combined capital city house values were 28% higher than combined capital city unit values.
Over the 12 months to March 2014, house values across the combined capital cities have 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.
Across the individual capital cities, house values are higher than unit values in each city with the differentials recorded at: Sydney (40%), Melbourne (40%), Brisbane (27%), Adelaide (31%), Perth (23%), Hobart (12%), Darwin (34%) and Canberra (46%). In most capitals we are seeing this differential widening.
Given this widening gap, it is no real surprise we are seeing a rapid shift to greater development of units as opposed to houses.
Over the past year, more units have been approved for construction than houses in each of Sydney, Melbourne, Brisbane, Darwin and Canberra.
It is important to remember that overwhelmingly more houses sell each year than the more affordable alternative which is units.[sam id=43 codes=’true’]
The challenge now being as values rise, certain buyers become priced out of the detached house market and have to look for more affordable alternatives which only the unit market can offer.
The table in this report highlights this fact well, detailing those suburbs across each capital city which has the greatest difference between house and unit values.
As you’d expect the suburbs listed are some of the most exclusive, expensive and desirable locations in each of our capital cities.
Although unit values are generally much lower than the corresponding house values, relatively they are significantly more affordable and achievable for buyers seeking to live within these suburbs.
Peppermint Grove on the banks of the Swan River in Perth is the capital city suburb with the greatest differential between capital city unit and house values. House values are 687% (or almost 7 times) more expensive than unit values in the suburb.
Many people aspire to live in inner city areas in our most desirable suburbs close to rivers, beaches or harbours. The reality is that there is a short supply of detached houses in these areas and plenty of demand, as a result many will never be able to meet these aspirations.
The alternative of course 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.
A further point to note, having visited many of these suburbs it is important to realise that if you are going to purchase a unit in these suburbs they are often older style units which don’t come with modern architecture.
Most of these suburbs are old established suburbs and have a fairly limited supply of units, most of which were built many years ago.