House prices play second fiddle to units in almost half our cities

THE traditional idea that you’re better buying houses instead of apartments has been blown apart by an analysis of 20 years of property price growth.

UNITS are no longer the poor cousins of houses in Australia’s real estate market.

Changing lifestyle choices and demographics have resulted in apartment and other unit prices growing more than house prices over the past 20 years in almost half of the nation’s capital cities, a News Corp Australia analysis has found.

Unit price rises in Perth, Hobart and Darwin are higher than houses, in Melbourne they are almost identical, and while Sydney’s unit price growth from $185,000 to $764,000 has lagged the city’s soaring house prices, its units today are more expensive than houses in every other capital except Melbourne.

Two decades of Real Estate Institute of Australia data shows that median unit prices have more than trebled in every city, beating all other investments, including shares.

Young couples, first home buyers and downsizers are buying units over houses. Photo: Chris Eastman

REIA president Malcolm Gunning said while units were once seen as a poor relative to houses, “that has changed” as people wanted to be closer to CBDs, jobs and transport.

“A lot of apartments are being built not as second-class accommodation but as preferred accommodation,” he said.

“The family unit wants to be in a house but the couples often prefer an apartment and a lot of downsizers prefer an apartment. A lot of investors prefer apartments because they tend to be near public transport and jobs.”

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A major housing outlook report last month by QBE forecast unit prices to fall in a majority of capital cities by 2020, but were tipped to rise by 8.7 per cent in Hobart, 3.2 per cent in Adelaide and 2.4 per cent in Canberra.

Mr Gunning said unit prices would be under pressure in areas where there were large clusters of apartments that had been built for speculative investors. “It’s already taking place,” he said.

Metropole Property Strategists CEO Michael Yardney said he expected lower property price growth in the next few years, with units under extra pressure as first home buyers faced affordability issues, investors faced lending restrictions, and there was an oversupply of off the plan apartments in some cities.

Metropole Property Strategists CEO Michael Yardney says location is more important than land today.

Mr Yardney said people’s perception of unit living had changed.

“Where once we may have seen medium and high-density developments as ‘slums’ intended for lower socio-economic classes, in the past 20 years apartment living has become the practical and trendy alternative, in particular sought after by young, upwardly mobile professionals,” he said.

“They are prepared to trade space for place.”

This challenged investors’ traditional view that it was better to buy property with land, Mr Yardney said.

“Smart investors recognise that the location of their investment property will do 80 per cent of the heavy lifting with regards to its capital growth.

“So they buy well-located apartments in the inner suburbs of our capital cities.”

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