A record price gap has opened between Sydney’s detached houses and units after the median price of a standalone residence in the city surged by $4200 a week during the last three months of 2020.
The median price for a separate house in Sydney reached a record $1.21 million in the December quarter and is 66 per cent higher than the median unit price, Domain Group data shows. That is the biggest difference between houses and units in Sydney since Domain began tracking prices in 1993. The average price gap over the past decade has been 46 per cent.
The strong recovery in the value of standalone houses in the second half of last year means that property type has erased the 14 per cent price slump during 2017 and 2018.
In contrast, the median price of a Sydney unit remains $20,000 lower than before the onset of the coronavirus pandemic last March and 7.5 per cent below the median unit value in mid-2017 when property prices last peaked.
Domain’s senior research analyst, Dr Nicola Powell, said unit prices could be under further pressure this year.
“Over the past three decades it is rare that house and unit prices move in opposite directions annually,” she said.
“Weaker investor activity has disproportionately impacted unit prices because they tend to be the preferred property type. There are also particular locations with increased supply as a result of heightened development in recent years. Changed lifestyle preferences post-lockdown and the option of remote working have driven demand to outer suburban and regional locations as buyers seek affordability, liveability, space and greater value for money.”
Dr Powell said weak population growth due to international border closures meant there was a risk of further distressed selling by investors in segments of the home unit market that rely on rental demand from new migrants and international students.
“There is only so long some investors will be able to keep their investment going if they are unable to get a tenant,” she said.
The areas most vulnerable to forced sales were in the inner suburbs of Sydney and Melbourne, Dr Powell said.
Property Investment Professionals of Australia chairman and buyer’s agent Ben Kingsley said demand from owner-occupiers had driven recent property price gains and predicted a deepening divide between house and unit prices in future.
“The lower value markets will have a terrific time,” he said. “It’s going to be first-home buyers and upgraders in the market mainly.”
A new report from real estate agency PRD, which uses Australian Property Monitors figures to analyse the market at different distances from the CBD, shows properties in the middle-ring of Sydney performed strongest in 2020 with the median prices of these homes “above the inner-ring for the first time”.
Vendor discounting data, which measures the difference between how much the home was first listed at and how much it eventually sold for, shows houses in the inner, middle and outer rings on average achieved more than their initial asking price last year. However, apartments had the opposite result with the inner, middle and outer rings selling below the asking price.
Real Estate Institute of NSW chief executive Tim McKibbin said a big percentage of who purchases units are investors who tend to have a different mindset to other buyers during periods of economic turbulence.
“Uncertainty has a higher impact on them,” he said
In Melbourne the gap between the median house and unit price has also widened, reaching 64 per cent in the December quarter compared to an average difference of 52 per cent over the past decade.
Jennifer Duke and Matt Wade, The Sydney Morning Herlad, 30 January 2021