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The price gap between Melbourne houses and units has widened over the past year, and experts expect it will grow further while international borders remain closed and immigration is at a standstill.
Melbourne’s median house price – which hit a record high of $936,073 in the December quarter – is now 64 per cent higher than the unit median of $569,677, which also reached a new high in December, according to the latest Domain House Price Report.
In some of Melbourne’s most affluent suburbs, the price gap between houses and units is far greater. In Toorak, for example, it will cost $3.2 million to upgrade from an apartment to a house and in Brighton, you would need to find an additional $1.9 million to upsize to a house.
Buyer’s advocates and real estate agents say the widening gap between houses and units, which largely reflects a decline in investor activity in the city’s apartment market, presents a good opportunity to buy, especially for owner-occupiers, who aren’t relying on rental income to help pay the mortgage.
Prior to the pandemic, unit prices were growing at a faster rate than houses, with 12.2 per cent growth over 2019, compared to 8.7 per cent for houses.
However, last year Melbourne houses outperformed units, with house prices growing by 3.9 per cent in 2020, compared to apartments, which grew by 2.5 per cent. In the last three months of last year, house prices increased by 5.3 per cent, compared to 4.4 per cent for units.
Domain senior research analyst Nicola Powell says she expects the gap between houses and units to continue to grow this year on the back of the pandemic, which has led to an increase in remote working and seen many inner-city dwellers seek out bigger homes in the suburbs or in regional areas.
The price gulf between detached houses and units in Melbourne has widened sharply after the median price of a standalone residence in the city surged by $3600 a week during the last three months of 2020.
Melbourne’s median house price reached a record $936,000 in the December quarter and is now 64 per cent higher than the median unit price, the Domain house price report shows.
That compares with an average price gap of 52 per cent over the past decade.
Apartment rents have fallen off a cliff in Sydney and Melbourne, on the back of collapsing demand among international students and migrants, and changes to personal finances.
According to Domain’s latest rental report, Sydney’s unit rents have tumbled to 2013 prices, dropping 5.1 per cent on the quarter and 7.8 per cent on the year to $470 in December. This marks the steepest quarterly and annual fall since Domain rental records began in 2004.
Similarly, Melbourne suffered a 3 per cent quarterly decline and 7.6 per cent yearly decline to a five-year low of $388.
Of all the capital cities, Melbourne units have recorded the deepest fall in asking rent since pre-pandemic March, down 9.8 per cent.
Domain highlighted that although the rate of decline eased over the December quarter, three consecutive quarterly falls have resulted in the steepest annual fall on record.
“For the first time in five years, Melbourne is the third most affordable capital city to rent a unit, after Adelaide and Perth,” Domain said.
“A marked change considering Melbourne was the third most expensive city to rent a unit back in March. Inner-city apartments have been hardest hit with rents at a seven-year low, followed by the inner east and inner south hitting a four-year low.”
As for Sydney, Domain explained that unit rents have been hardest hit in the city and east and inner west, with rents at an eight-year low, while the lower north shore is the cheapest in nine years.
Two areas have bucked the downward trend: unit rents on the Central Coast and Northern Beaches have reached record highs.
“Annually, unit rents have been falling since mid-2018, but this trend has been accelerated by changes as a result of COVID-19.
“The pandemic-induced collapse to overseas migration and foreign student numbers has reduced rental demand. Units have felt the impact, particularly inner-city apartments, which are home to more rentals and have a greater exposure to demand sourced from overseas migrants,” Domain said.
It tipped that while vacant unit rentals will continue to rise, tenants in search of a house will start to find fewer available to rent.