Units more affordable, but buyers still attracted to detatched houses

With buyers looking for affordable housing alternatives, it would be expected that the number of transactions for units would be increasing. However, that hasn’t been the case in recent times.

Even with a current national median house price of $415,000 nationally and $390,000 for units, it is clear many buyers will have some difficulty entering into home ownership.

Although today’s RP Data analysis shows that at a national level the median unit price is just $25,000 cheaper than the median house price, across the combined capital cities units are $53,000 more affordable.

Across individual capital city markets, the difference in the selling price for houses and units range from $48,000 in Melbourne to $110,000 in Sydney and Canberra. Given the significant difference in the prices of houses and units in Sydney and Canberra, it is no surprise these cities have recorded the greatest proportion of unit sales over the past year of all capital cities at 42.5% and 42.8% respectively.

The analysis also highlights the difference between median house and unit selling prices at a capital city and national level over time. The data confirms that median unit prices were consistently higher than median house prices from mid-1996 to early 2003 at a capital city level, and up until mid-2004 at a national level.

This result is partly a function of the cost of housing being significantly lower at this time but is also because units were more abundant in inner city areas and attracted premiums because of this convenience.

Over recent years, the gap between house and unit prices has increased significantly, with the difference reaching as much as $76,000 across the combined capital cities and $35,000 across the nation.

The analysis confirmed that a vast majority of sales across the country are for detached houses as opposed to units. Data in the recently released 2011 census showed that 75.6% of occupied dwellings were for houses which reinforces that they continue to be the dominant housing preference.

RP Data also reported that there has been a decline in the proportion of units sold, both nationally and at a capital city level. This decline can be partially attributed to more off-the-plan unit sales, which do not get included in sales figures until such time as they settle.

There has also been a decline in the response to available first home buyer grants and stamp duty concessions, coupled with recent falls in home values, this has improved affordability. Unit values have typically recorded lower value declines than that of houses, which may be leading to buyers taking the opportunity to buy houses as opposed to units.

Over the coming years, we would expect that units are likely to grow in popularity. Although unit sales pale in comparison to house sales across the country, as developable land becomes scarce and more expensive to develop, property developers are likely to focus on higher density housing.

The community at large is also likely to demand more units, particularly in suburbs close to city centres or along transport corridors. This will likely be driven by lifestyle and affordability factors as well as town planning strategies.

Demographic factors are also likely to contribute to greater demand for units with baby boomers looking to downsize from their large family homes into something smaller and more easily maintainable. Also, the ongoing demographic shift to single person households and smaller families is likely to result in further growth in unit demand.

Cameron Kusher is senior research analyst at RP Data.

This article originally appeared on SmartCompany.