Australian property: How the country is witnessing a big house and unit divide

Australia has a great divide when it comes to property. And while demand has soared for one type during the pandemic, experts say things could change in 2021. This is why.

Houses have clearly won the popularity stakes during the pandemic as home buyers and investors find financial comfort in bricks and mortar – but especially in land. However, experts say units could make a comeback 2021.

Throughout 2020 the volume of houses sold far outweighed unit transactions, and price growth for the property type also soared in many locations.

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The Real Estate Buyer’s Agents Association and Property Talk Australia recently conducted their inaugural Buyer Barometer Survey, which showed that of respondents planning to invest in property in 2021, 49 per cent were looking to purchase a house while only 7 per cent indicated a preference for units.

Demand for houses is far outweighing the demand for units.

The great house and unit divide

While it’s not unusual that houses outsell units in terms of volume in a year, CoreLogic data has shown that the share of houses as a portion of sales had actually increased.

House sales represented 74.2 per cent of the total share in the year to January 2021, up from 73.2 per cent a year ago and 66.7 per cent five years ago.

Eliza Owen, head of Australian research at CoreLogic said over the coming months that figure could rise to record highs.

“We’re still collecting more house sales for 2020 and that may push the percentage up. In a few months’ time we’ll get a really clear picture of just how popular houses have been,” she said.

The widening gap between houses and units can also be seen in terms of price.

“For people trying to upgrade from units into housing stock that could be a greater challenge, especially in the short term,” she added.

Demand for houses has never been higher. Picture: Andrew Henshaw

Why houses are king right now

REBAA president Cate Bakos said houses are continuing to find favour with both homebuyers and investors, which is fuelling prices.

“We have seen surprising house price growth despite COVID-19 and we expect this to continue throughout this year as pent-up demand plays out. In the midst of a difficult year, combined with an overall stock shortage, it’s evident that buyer frustration is high,” she said, adding that both investors and home buyers were seeking space as families and investors compete for the same stock.

“It’s becoming really hard to get your hands on anything with three or more bedrooms,” she said.

“Property investors are seeing the potential of manufacturing capital growth in the current market with almost a quarter of respondents looking for a property with renovation potential,” she added.

Real Estate Buyers Agents Association president Cate Bakos

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The HomeBuilder initiative has been another key driver in house demand. Residential construction grew at its fastest pace in Two-and-a-half years with HIA figures reporting new home sales in the December 2020 quarter were almost 100 per cent higher than in December 2019.

Ms Owen said the scheme’s tight timelines for eligibility was another tick in the favour of houses.

“This meant the take up of the scheme was largely used for detached houses, rather than off the plan unit sales, with the latter requiring a number of purchaser commitments before the project commences,” she said.

Low levels of investor lending was also a reason houses came to the fore – their absence in the unit market has left an impact. Over 2020, the average value lent to investors for the purchase of property was 22.7 per cent below the monthly average in the past decade.

Units may have fallen out of favour, but some experts are predicting they could make a comeback this year.

How units might make a comeback

Ms Owen pointed out that 2021 could see buyer behaviour shift if affordability becomes an issue.

“We’re coming into a different market now than we were in for most of 2020 where buyer activity is increasing and housing markets are sitting at record highs in a lot of cases. I wonder if those impending affordability constraints will have people looking to more affordable stock, like units,” she added.

Ms Bakos said first home buyers could take advantage of the current state of the unit market.

“People might say they’re after a three bedroom because it gives young professional couples a dedicated study each, or a study and a spare room, but if you really have to compromise then having a two-bedroom unit is a very workable possibility for first time buyers,” she said.

“I think the appeal of three bedroom houses will fade a little bit if we keep the pandemic under control. But as long as the threat of working from home continues, like forced lockdown, homes with at least three bedrooms will remain high on people’s lists,” said Ms Bakos.

Demand for houses is far outweighing the demand for units, but that could change in 2021.

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