House Values vs. Unit Values
by Leigh Martinuzzi MPP
Housing values over the past 12 months are up 24.8%, while unit values in the same period have increased 14.4%. Combined, this is the highest annual rate of growth for property values since 1989. However, the disparity between growth rates of housing vs units is the largest it has been, currently sitting at 10.5% apart. One very plausible reason for this difference in growth rates is due to the onset of the COVID pandemic (see chart below).
When the pandemic hit, many people started to favour housing over high density living for the most obvious, space. This caused demand for housing to grow. At the same time buyer demand for high density living shrunk with many people moving to the outer suburbs and regional areas. The pandemic helped us realise the ease in our ability to work remotely and in turn created many hybrid work arrangements. This has continued to push demand for housing over units.
On top of that total property, availability shifted. Units were more abundant in availability as people moved outwards and at the same time, many international visitors returned home who previously occupied many of the inner-city dwellings. At the same time, housing availability dropped. As highlighted in the chart below, the total advertised listings across our capital cities for units is down -3.7% in the past four weeks and -7.8% below the five-year average. Meanwhile, housing availability is down -12.5% in the past four weeks and -32.7% below the five-year average. With heightened demand and tightened availability prices are pushed up which is more evident in the housing sector.
The likelihood of an interest rate rise later this year represents a clear risk and downside to the national property market. Worsening housing affordability will mean many prospective buyers will be pushed out of the market. This will likely favour unit price rises moving forward and more buyers seek affordability, creating heightened demand in the unit sector over the housing sector. On top of this, the international borders reopened on the 21st of February this will further bolster demand for median and high-density living.