Housing affordability pressures create pain for apartment upgraders

By:

Rapid growth in Australian housing values and rents over the past year has contributed to greater affordability pressures for households.

Prop Market GrowthABS lending data shows first home buyer finance commitments have fallen -22.8% since January 2021, and rising rent prices have created housing stress for tenants, particularly in parts of regional Australia.

Perhaps a more bizarre outcome of the current housing affordability pressures is the anecdotes that have emerged around difficulties upgrading.

With Australian dwelling values rising 20.3% in the year to September, some recent home sellers have found it difficult to re-enter the market once they have sold.

The situation poses a particular barrier for those looking to upgrade from apartments to houses, with national house values increasing 22.9% in the 12 months to September, compared to a 12.0% lift in unit values.

Similarly, the gap between median house and unit values continued to trend at record highs through September 2021, with typical capital city house values sitting 34.4% higher than unit values.

Extending on a recent analysis that compares unit values to houses at the capital city level, the table below highlights the local government areas across the capital cities where median unit values would count the least toward house values in the same region.

In other words, the analysis suggests which LGAs have the biggest difference between house and unit values, and could see the biggest challenge for apartment owners looking to upgrade to houses in the same area.

The trend is most startling in Mosman Park in Perth, where the median unit value would account for just 21.4% of the standard house value – in other words, the full value of a unit in the LGA would be a little more than a standard house deposit in the same region.

Similarly, low ratios could be seen across Strathfield in Sydney, where unit values account for just 23.0% of house values, and Mosman, at 24.5%.

A trend in this data is that more expensive dwelling markets, particularly in the housing segment, tend to correlate with the least amount of purchasing power from units.

Many of these could be considered more ‘desirable’ housing markets, including those closer to CBDs.

House Price DifferencesLGAs with higher levels of unit stock as a proportion of total housing stock generally had a lower value relative to houses.

This is particularly evident in Sydney markets like Strathfield (where 64.6% of housing stock are units) and Woollahra (61.4%), as well as the Melbourne markets of Port Phillip (74.3%) and Stonnington (65.5%).

Higher concentrations of unit supply have likely put downward pressure on growth in unit values over time.

This dynamic is not necessarily bad for buyers; the flip side of a lower proportion of housing stock is that there is a higher density of relatively cheap stock, which accommodates greater socioeconomic diversity for living closer to the CBD.

But looking at the change in unit values as a portion of housing over time shows apartment owners in the current market would be able to put less towards a house than they could five years ago.

Houses Property MarketThis would be particularly frustrating for those looking to start families or seeking more space.

LGAs across Hobart, Darwin, and Brisbane generally had lower gaps between house and unit values, though there are likely different dynamics at play.

Across Greater Hobart, units are generally high in demand but low in supply.

Demand may be attributed to a more mature aged demographic looking for downsizer or lower maintenance options, as well as popularity amongst investors.

CoreLogic estimates the vast majority of Hobart units are owned by investors, and units may be in high demand as the short-term rental accommodation markets hold strong amid an uplift in domestic tourism.

In the past five years, there has actually been a slight increase in the value of units as a portion of housing values, suggesting the capacity to upgrade may have actually improved.

12

ALSO READ: Why is Australian housing so expensive and what can be done to improve housing affordability?

icon-podcast-large

Subscribe & don’t miss a single episode of Michael Yardney’s podcast

Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.

Need help listening to Michael Yardney’s podcast from your phone or tablet?

We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.

icon-email-large

Prefer to subscribe via email?

Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.


About

Eliza is head Of Residential Research Australia for Corelogic and a respected property market commentator. Eliza holds a first class honours degree in economics from the University of Sydney


'Housing affordability pressures create pain for apartment upgraders' have no comments

Be the first to comment this post!

Would you like to share your thoughts?

Your email address will not be published.
CAPTCHA Image

*


Copyright © Michael Yardney’s Property Investment Update Important Information
Content Marketing by GridConcepts