When considering prestige property, it is easy to think of luxury homes, extensive gardens and beach houses, and market trends certainly reflected this sentiment in recent years. From September 2020 to April 2022, national house values saw an unprecedented 32.5% increase in value, with units ‘only’ seeing a 16.1% increase in price over the same period. Across the pandemic period, we’ve witnessed an increased demand for real estate across the board – with a clear spike in demand for houses and locations in less densely populated regions. In other words, units and apartments went out of vogue, despite increasing in value.
But with restrictions in the rearview mirror, is it time to have another look at prestige apartments? Whether for living in or as an investment, read on to gain further insight into the current trends for units and apartments in Australia.
Compared to this time last year, national unit values have increased by 0.5% in September 2022. At the same time, national housing values have increased by 2.1%.
“As we move further into the downwards phase of the cycle, and the annual trend approaches negative territory, it’s likely the annual performance gap will begin to widen in the other direction, with unit values being more resilient to affordability constraints and rising interest rates.” said CoreLogic Economist Kaytlin Ezzy.
This downward value trend was first felt in high-value apartments, as lifestyle preferences and lockdowns sent people away from even luxury apartments. However, with consecutive rate rises increasing borrowing costs, we see both medium and lower-quarter property values also trending downwards.
This followed a trend over the pandemic of increased demand for real estate across the board – with particular demand for houses and locations in less densely populated regions. In other words, units and apartments went out of vogue, despite increasing in value.
But with restrictions in the rearview mirror, is it time to have another look at prestige apartments? Whether for living in as an investment, read on to gain further insight into the current trends for units and apartments in Australia.
According to Core Logic RP Data, looking at the last quarter to September shows us a more sobering picture. The upper quartile, aka higher value units, across the combined capital cities, have seen value declines of -3.9%. In the same period, middle market units fell -2.2%, and lower quartile units fell only -0.4%. In a sentence, almost all units have seen a decline regardless of the asking price.
As we have seen consistently over the last 12 months since the housing market’s peak, Brisbane and the Gold Coast remain resistant to the declining values of units across all quartiles. Unit values for the last rolling quarter showed an increase of only 0.4%. This was in line with other more affordable capitals of Perth (0.6%) and Darwin, taking the lead with a robust 1.4% increase.
Whilst these more affordable capitals show strong resistance to this downwards trend; the trend is undoubtedly in motion. Core logic’s latest data for September 2022 shows combined (average) values of units listed for sale decreased by-0.8%.
Traditionally, Spring sees a 20% increase in new listings (properties being brought to the market for the first time). However, it seems vendors are less willing to sell during this downward trend – with national new unit listings down -14.8% versus the same time last year and -4.4% below the prior five-year average. Traditional vendors may also choose to rent instead of sell, as consistent rent rises are being felt nationwide. Brisbane and the Gold Coast saw average rental rates rise 1.4% in September 2022 alone.
Unit prices are gently trending downwards. Whilst rental demand remains strong, it is unlikely we will see any insignificant reductions in values in the immediate future. When we do see vendor discounts, the most significant deals are to be found in Melbourne and Sydney markets.
Ultimately, the destiny of unit values will likely be tied to interest rate movements and corresponding mortgage serviceability. Increased borrowing costs reduce the return on apartments, whilst inflation threatens to reduce the purchasing power of cash held. The jury remains out on whether now is the time to purchase that prestige apartment. However, if you take your time, follow the market, and are ready to make a well-timed offer, you might clinch a great deal.
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