Units outperform houses as market stabilises in March: RP Data-Rismark

Cheaper units outperformed houses in Australia’s major capital cities by a wide margin during March, according to the latest RP Data-Rismark Daily Home Value Index Results.

Capital city unit prices increased by 0.9% during the month to a median of $400,000, while detached house prices increased by just 0.1% to a median of $464,500.

Across both markets capital city dwelling prices (houses and units combined) were up 0.2% in March to a median of $445,000 leaving dwelling values unchanged over the quarter – the strongest quarterly result since March 2011, when values increased by 0.7%. 

“Looking at the quarterly results on a more granular basis, the improved conditions over the March quarter can largely be attributed to the performance of Australia’s largest housing market, Sydney, where values rose 1.1% over the quarter,” says RP Data research director Tim Lawless.

“Values were down across many of the other capital cities over the quarter, with the most significant drop recorded in Adelaide, where dwelling values were down 1.5%,” Lawless says.

The March figures show that units delivered investors a median rental return of 4.8%, while houses managed a median return of 4.1%.

Over the past 12 months, units have delivered investors a 2.2% total return (capital growth plus rental growth) while housing returns have fallen by 0.8 % over the same time.

RP Data senior research analyst Cameron Kusher tells Property Observer the better growth in units over houses in March is “definitely a trend” that has been in evidence over the past five years.

“It comes back to affordability and the fact that more people are willing to live long term in apartments.

“We now have fairly mature unit markets within capital cities – these have developed over the past 15 to 20 years,” he says.

While noting the strong performance in Perth over March, Kusher expects that Sydney will most likely be the best-performing capital city market over next 12 months.

“We don’t expect astronomical growth in Sydney, but around 3% for the year,” says Kusher.

Kusher says an undersupply of housing, fairly strong population growth and an easy of stock on market are driving the Sydney market.

As for Perth, Kusher says if the market has not yet begun recovering, it is now fairly close to that point.

However, he expects further weaknesses in Melbourne and on the Gold Coast.

Perth was the strongest capital city market in March, registering a 1.4% rise in dwelling prices to a median of $445,000 with unit prices up 1.8% to $384,000 and house prices up 1.4% to a median of $455,000.

Despite the improvement in March, Perth unit prices are still down 7.2% year-on-year while Brisbane-Gold Coast houses are down 7% year-on-year, making them the weakest unit and housing markets respectively over the past 12 months.

Sydney dwelling values increased by 0.4% over March, with units up 1% to $470,000 and houses managing just 0.2% growth to $572,000.

The Melbourne housing market fell 0.2% over March (down 5.4% over the past 12 months) with a 0.3% drop in house prices to $495,000 matched by a 0.3% rise in unit values to $420,000.

Adelaide had the greatest disparity in house and unit performance during March, registering 3.1% gain in unit prices to a median of $310,000 compared with a 1.8% drop in house prices to a median to $385,000.

Among the five major capital city markets, only the Brisbane-Gold Coast market bucked the trend, with house prices rising 0.5% to a median of $425,000 and unit prices falling 0.3% to $353,000.

Canberra units increased by 2.9% to a median of $417,500 while the small Hobart unit market gained 0.6% to be 15.4% for the first three months of the year with a median price of $275,000.

Over the quarter Hobart has the best performing capital city with dwelling values up 7.3% over the three months to March 31, 2012.

Darwin dwelling values increased by 1.1% over the month to a median of $470,000 with houses up 1.6% to $520,000, while unit values fell 1.3% to a median of $378,500.

The Northern Territory capital city has the highest rental yield for both houses (5.7%) and units (5.9%) of all eight capital cities.

According to Ben Skilbeck, managing director of Rismark International, there are a number of factors pointing towards an improvement in housing market conditions over recent months.

“The ratio of national house prices to household disposable incomes is currently below the decade average.

“Additionally, according to the ABS housing finance data, both the value and number of loan approvals for the purchase of established dwellings are at levels not seen since November 2009.

“First-home buyers as a proportion of all home loans approved are back to levels not seen for two years,” he says.

Skilbeck says yields are also showing modest improvements with rental yields for houses across the combined capital cities improving from 3.6% in 18 months ago to 4.1% currently with gross yields on units improving from recent lows of 4.4% to 4.8%.

“The most significant rental yield improvements have been recorded in Darwin, Perth and Brisbane, which have increased by 22%, 21% and 1% respectively from recent lows,” he says.

Photograph by Brian Yap, courtesy of Flickr.