- National unit values are down 0.2% over the year to date, with houses recording deeper declines
- Median days on the market have increased across the board
- Outlook for the short to medium term looks pessimistic, says CoreLogic
With national dwelling values falling again this month, selling conditions for units across Australia have continued to weaken, benefitting buyers.
National unit values are down 0.2% over the year to date. National houses have recorded deeper declines – both on a monthly (-1.4%) and quarterly (-2.2%) basis – although house values are still 1.2% higher than at the beginning of the year.
As a result, the annual performance gap between national houses (9%) and units (4.6%) has continued to narrow.
CoreLogic Economist Kaytlin Ezzy said the impacts of consecutive rate hikes are becoming more wide spread, with growth heading into negative territory across most markets.
“Units are relatively more affordable and attract strong investor activity, meaning value changes across the medium to high density sector are proving to be less volatile than the house segment,” Ms Ezzy said.
“However, market factors including increased interest rates, lower consumer sentiment and higher cost of living, mean selling conditions for units have also shifted in favour of buyers.”
Median days on the market have also increased across most markets, with a six-day increase nationally. This has caused vendors to offer larger discounts in order to secure a sale.
Unit values have decreased across the combined capitals by 1%, making them 1.8% lower over the three months to July.
“Across the individual capital city and rest of state unit markets, Hobart and Regional Tasmania recorded the largest decline in values over July, down -2.5% and -2.1% respectively,” Ms Ezzy said.
“The sharp deceleration in value growth was likely caused by an increase in newly advertised unit listing across Tasmania in July.
“While still well below the previous five-year average, this increase saw total advertised unit supply across Hobart rise 51.0% above the levels recorded in July 2021.”
In Sydney, unit values have declined for the sixth consecutive month. Values are now around $35,000 lower over the year to date. In Melbourne, they declined by 1.2% in July and 2.1% over the quarter.
“With consecutive rate hikes and high total listing supply, unit values across Sydney and Melbourne are now just 0.3% and 0.5% above the levels recorded this time last year,” Ms Ezzy said.
“Looking at CoreLogic’s daily index, it’s likely Sydney and Melbourne’s annual trend will fall into negative when the August results are reported.”
Unit rental values up
While sale prices have declined, unit rental values have surged across the unit market. National rents rose by 1.3% in July, with a 10.7% rise over the year to July. This is the highest annual rental rise on record, according to CoreLogic.
“A number of factors are driving demand for unit rentals including unit’s relative affordability,” said Ms Ezzy.
“At approximately $493 per week, the average unit rental is still nearly $60 a week cheaper than the average rental value for a house ($552).
“While national units (10.7%) recorded larger annual percentage rises in rents compared to houses (9.5%), in dollar terms both markets saw weekly rents rise by approximately $48.”
Outlook for the unit market
Taking all of these factors into account, the outlook for the unit market over the short to medium terms remains pessimistic, thanks to more interest rate rises. A surge in fresh listings is also likely to add further downward pressure as the spring selling season begins.
Although rental growth is strong, and the unemployment rate remains at a near 50-year low, dwelling values are still expected to decline in conjunction with interest rate rises. Unit values historically have been less volatile to house, thanks t their relative affordability, however, unit values will continue to decline as the downward phase of the housing cycle carries on.
