Warning on sub-market apartment purchases: Tim Lawless

Potential property investors are warned to be wary of apartment purchases in sub-markets where supply levels are heightened or where there is a strong pipeline of apartment supply.

According to CoreLogic RP Data's Hedonic Home Value Index Results for August, apartment supply has ramped up substantially more than detached housing supply.

CoreLogic RP Data research director Tim Lawless said it has generally been the case throughout this cycle, and previous cycles, that house values have risen at a faster rate than unit values.

“However, over the past three months across every capital city except Melbourne and Brisbane, it has been the apartment sector that has shown the stronger growth result,” he said. 

"Unit values have recently shown a higher rate of growth than detached houses, with values rising 0.8% over the month compared with a 0.3% rise in house values. The rolling quarterly rate of growth was also higher for units at 6.7% compared with 5.1% across the detached sector.

“Sub-markets where supply levels are heightened, or the pipeline of apartment supply is substantial, should still be viewed with some caution.

“This result comes at a time when apartment supply has ramped up substantially more than detached housing supply. To see such a broad-based over performance of units relative to houses, provides some comfort for developers and purchasers that higher density stock values are appreciating."