THE GREAT DIVIDE: NAVIGATING THE EXPANDING UNIVERSE BETWEEN HOUSE AND UNIT VALUES
In the ever-evolving landscape of real estate, an intriguing phenomenon is reshaping the market: the widening gap between the values of houses and units. As we dive into the heart of this trend, let’s explore the suburbs leading and lagging in the house premium race, offering insights for buyers, sellers, and the curious alike.
The real estate cosmos has witnessed a significant shift, propelled by the pandemic's desire for more space, the scarcity of land, and the underlying value it holds. This trifecta has catapulted house values to new heights, leaving units in their dust. Since March 2020, when the world seemed to pause, the difference in median values between city houses and units (affectionately dubbed the "house premium") has ballooned from 16.7% to a staggering 45.2%, translating to nearly $294,000.
Tim Lawless, the maestro of market trends at CoreLogic, notes that while houses have always worn the crown of higher value and capital gain, recent years have supercharged their ascent. The quest for space during the pandemic, coupled with the flexibility to venture further from urban cores, has fueled this surge. Although a brief respite in the rate hike cycle saw the premium dip as house values momentarily softened more than units, the gap has since rocketed to record highs.
From the pandemic's start to January of this year, city houses have notched a 33.9% value increase, equating to a cool $239,000, while units have seen a modest 11.2% rise, or $65,235. The past year alone has mirrored this trend, with houses upping their game by 11.0% compared to units' 6.9%.
Sydney, the belle of the ball, has experienced the most dramatic expansion in house premium, soaring almost 36 percentage points since the pandemic's onset and climbing from sixth to the coveted first spot in the premium leagues. Melbourne, Perth, Adelaide, and Brisbane aren’t far behind, each posting impressive gains, while Darwin plays the contrarian, witnessing a reduction in its house premium.
However, the plot thickens over the last 12 months. Sydney remains the leader, but cities like Brisbane and Adelaide have seen their premiums shrink, hinting at a shift towards more affordable housing options and a burgeoning interest in units.
Spotlight on the Suburbs: Where the Premiums Play
In the glamorous realms of Sydney, Melbourne, and Perth, certain suburbs stand out for their jaw-dropping house premiums. Bellevue Hill in Sydney takes the crown with a 525% premium, Armadale in Melbourne boasts a 372% premium, and Mosman Park in Perth shines with a 431% premium. These affluent areas offer a golden ticket for those dreaming of a postcode prestige without the freestanding home price tag.
Opportunities Abound in Lower Premium Suburbs
On the flip side, suburbs with a minimal gap between house and unit prices present tantalizing opportunities. For those willing to stretch for a slice of the land, these areas could be the gateway to stronger capital gains without the exorbitant premium.
As house prices soar to the stratosphere, leaving many earthbound dreamers in their wake, the quest for affordability intensifies. The allure of medium to high-density living, with its lower price points and strategic location near essential amenities, grows stronger.
In this vast universe of real estate, the choice between space and location, house and unit, becomes ever more nuanced. Whether you're navigating the market for the first time or looking to expand your portfolio, understanding the dynamics at play between house and unit values is key to making informed decisions.
So, as the gap widens, where will you land in the great real estate divide?
Josh Pagotto # 0404 351 445
