Affordable units keep outperforming houses

Over the past 12 months unit values have increased by 0.1% across the combined capital cities compared to a value fall of -2.0% for houses. In fact, unit values have increased at a rate faster than house values for most of the past five years as home buyers search for more affordable housing options.

According to the RP Data-Rismark Home Value Index, unit values across the combined capital cities have increased at an average annual rate of 6.3% over the past five years compared to growth of 5.7% for houses. More recently, the 12 months to April 2011 have seen unit values increase by 0.1% while house values have fallen by -2.0%.

Overall property values across the combined capital cities were down -1.5%. The result for April shows houses still dominate the total number of transactions (house sales made up 72% of all sales nationally) however the higher capital gains in the unit market suggest that demand for medium and high density living is on the rise.

Annual growth in unit values has been superior to that of houses in Sydney, Melbourne, Brisbane and Perth (our four largest cities) over the 12 months to April 2011. Over the past five years, average annual unit value growth has outperformed that of houses across the combined capital cities and within: Sydney, Brisbane, Adelaide, Perth and Hobart.

Is this a paradigm shift away from houses or simply home buyers searching for an affordable entry point into the market which units offer?

According to the current combined capital city median prices, units are -13.8% cheaper than houses. In various cities, the gap between median house and median unit prices varies from $140,000 in Canberra and $124,000 in Sydney to $42,800 in Hobart and $71,750 in Brisbane.

It is apparent that in recent times units have enjoyed superior growth in values to that of houses. Common wisdom suggests that houses appreciate in value at a faster pace than units because of the underlying value of the land however, this has not been the case within the capital cities over the last five years. We would suggest that unit values having increased at a faster rate than house values is the result of two main factors namely: the relative affordability of units and the quality location of many units, particularly within inner city areas.

Source: RPData

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