The results of the RP Data-Rismark Home Value Index for June showed that the unit market has outperformed houses over the last 12 months and during the last five years.
Historically, houses have enjoyed a much more rapid appreciation in value than the growth recorded by units. There are a number of reasons for this more rapid level of growth: greater demand for houses, diminishing availability of development land, higher quality of stock and design available for houses rather than units and the greater Australian dream to own a house rather than a unit, amongst a number of other reasons.Despite these factors, over the last five years units have recorded average annual value growth of 7.4% compared to 7.1% for houses.
However, the results suggest that the superior performance of units compared to houses is quite a new phenomenon as over the last 10 years the average annual value growth of houses 9.9% has well and truly outperformed units 8.0%.The improvement in the capital growth performance of units in recent times is most likely due to affordability issues. Based on current capital city median prices, unit prices are recorded at $420,000 compared to houses at $495,000. Accordingly, units offer a much more affordable alternative housing option than houses.Many unit developments, particularly newer units, are also in strategic locations and are where a large proportion of the market aspires to live but cannot afford to buy a detached home. In many cases, apartments provide a viable and relatively affordable option to buy into these markets.
A good example of this is Bellevue Hill in Sydney. Bellevue Hill is one of the country’s most expensive housing markets with a median house price of $3.85 million, unit prices in the suburb are recorded at $620,000, -84% more affordable than a house.The inner city and well established residential areas enjoy high demand for units because in most instances they are: well catered to by local amenity including shops and restaurants, well located close to working nodes and are serviced by existing public transport amenity which is often not available in outer suburbs of the capital cities.
Over the 12 months to June 2010, unit values have increased by 11.4% compared to growth of 10.2% for houses. On a month-to-month basis, annual value growth for units has been outstripping that of houses fairly consistently since April 2008.
