Unit values in more than a dozen Sydney and Melbourne suburbs are on the verge of hitting fresh peaks.
This comes as the pace of price increases gathers speed amid low supply and intensifying buyer competition, according to CoreLogic data.
Last month, nearly two out of five suburbs nationwide reached new highs in unit values.
In Brisbane and Adelaide, almost nine out of ten unit markets have already surpassed their previous highs.
Similarly, eight out of ten unit markets in Perth and more than one out of five in Sydney are at their peaks.
In an article from AFR, Eliza Owen, CoreLogic’s head of research, noted that unit values are likely to continue rising faster than houses as more buyers turn to cheaper housing options.
She said:
"In most of the capital cities, growth in unit values is starting to overtake that of houses.
This could reflect people trying to stretch their money by purchasing cheaper asset types.
This trend is evident in inner-city centres and popular parts of Sydney like the inner west, where demand is shifting to unit markets because detached houses are just not as accessible.
We might be reaching a point in the cycle where growth in units could accelerate more than houses due to the affordability barriers setting in."
Harbour City prices
In Sydney, suburbs in the inner west and inner south-west are dominating the list of unit markets on the cusp of reaching new highs.
This includes Enfield, Strathfield, Newtown, Chiswick, and Liberty Grove in the inner west, along with Revesby, Oatley, and Greenacre in the inner southwest.
Units in Western Sydney suburbs like Girraween, Rooty Hill, Northmead, and St Marys are also on track to post new record highs, as well as those in Thornleigh on the upper North Shore.
For example, Enfield, with a median value of $761,007, is just 0.3% or $2,040 shy of hitting a fresh record for the first time in nearly nine years.
If the recent quarterly growth rate of 2.2% and monthly gain of 1.8% continue, unit prices in the suburb could surpass the previous high by next month.
Strathfield units are only 0.2% or $1,242 away from eclipsing the record set nearly seven years ago after values accelerated by 3.4% in the past three months.
This is a sharp turnaround from the 0.2% decline in the previous quarter. Last month alone, unit values increased by 1.8%.
Newtown’s units need only rise by 0.4% or $3,432 to top the record set two years ago.
Growth has also gained momentum in the past three months, increasing by 3.4%, up from a 1.8% decline in the previous quarter.
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Last month, the median lifted by 2.2% to $834,547.
Median unit prices in Girraween and Greenacre, at $752,984 and $707,918 respectively, are hovering at record highs with just a 0.1% gain needed to eclipse their previous highs achieved about eight months ago.
In the same AFR article, Ms Owen commented:
"Those unit markets have shown decent growth in recent months, so it looks like they are in an upswing and set to reach record highs within the month.
As house values soar to new heights, some of that demand must shift towards units out of necessity.
It’s a more realistic option, which means the added demand could take some unit markets to new record highs, as we saw last month."
In Melbourne, units in Bayswater in the outer east are just 0.1% or $544 away from a new high after the median lifted by 1.5% in the past three months, up from a decline of 1.2% in the previous quarter.
Last month, unit values in the suburb increased by 0.6%.
Across Vermont, values are only 0.3% short of a new high, which could occur by next month after values rebounded by 1.6% from a 0.9% drop in the previous quarter and gained 1.7% last month alone.
Meanwhile, unit values in Carrum in the inner south and Mernda in the northeast are just 0.4% away from hitting new highs.
Unit markets where values exceeded their previous highs include Sydney suburbs like Stanmore, Rosebery, Rockdale, Alexandria, Camperdown, Maroubra, and Erskineville.
In Melbourne, median prices in Flemington, Reservoir, Sydenham, and Knoxfield also hit fresh peaks.
A note for investors
As always, these "short-term" high-growth suburbs aren’t necessarily the suburbs I would recommend investing in.
That’s because when it comes to property investment, it's most important to look for an investment-grade property in the ‘right area’ rather than chasing ‘top hotspots’ or growth areas.
But even before looking for the right location, make sure you have a Strategic Property Plan to steer you through the upcoming challenging times our property markets will encounter.
You see…property investing is a process, not an event.
Things have to be done in the right order – and selecting the location and the right property in that location comes right at the end of the process.
The fact is, the property you will eventually buy will be the result of a sequence of questions you will need to ask and answer and a series of decisions you’ll need to make before you even start looking at locations.
Long before we talk about a property or the right location with our clients at Metropole, we look at factors including their age, their timeframes, and the desired end results in other words, what do they really want the properties to do – are they looking for cash flow, capital growth, or a combination of both.
And that’s because what makes a great investment property for me, is not likely to be the same as what would suit your investment needs.
