Hotspotting

Hotspotting was among the first to identify and highlight the most significant change in the Australian real estate scene – the emerging trend which we document in the quarterly editions of the report titled The Rise and Rise of Apartments., published in association with Nuestar.

This trend has turned upside down the dominant paradigm in real estate, that houses out-perform apartments on capital growth. There is now growing evidence that attached dwellings are mounting a strong challenge to houses.

It has long been believed that land content was the big thing in driving property values and that units lacked this quality.

Increasingly, it’s clear that this theory about capital growth needs to be re-considered and to acknowledge that attached dwellings like apartments have qualities that houses don’t have and which are important to growing numbers of buyers.

The latest Housing Affordability Report, jointly released by CoreLogic and ANZ, has

observed that capital city unit prices increased more over the three months to October 2024, than did house prices over the same period, suggesting a growing preference among home-buyers and investors for units as an affordable option in getting into the market.

The growth difference was small, but it’s merely the latest in a growing set of figures showing the rising performance of units.

In the month of October, the median price growth for units was higher than for houses in the nation’s five biggest cities and also for the combined regions.

This was also the case for the October quarter.

In annual terms, price growth has been better for units than houses in the three capital cities leading the nation on market growth – Brisbane, Adelaide and Perth. Units have also out-performed in the regional markets of Queensland, WA, NSW and Victoria.

The annual growth in median unit prices, according to CoreLogic, has been 18% in Adelaide, 19% in Brisbane and 24% in Perth. Those are spectacular increases and provide compelling evidence to disprove the notion that attached dwellings don’t perform on capital growth.

There are also growing numbers of suburbs around Australia where unit price growth is higher, both in the short-term and the long-term.

The Hotspotting Research Hub shows that at Noosa Heads on the Sunshine Coast, the five-year growth average is 10% per year for houses and 17% per year for units. At Surfers Paradise on the Gold Coast, it’s 8% per year for houses and 12% per year for units.

There are many other similar examples across the nation.

REA Group, which publishes realestate.com.au, has recently highlighted locations where unit price growth is outpacing houses.

Megan Lieu, Economic Analyst at REA Group, says:

“Historically, house values have risen at a faster rate than units, but with affordability pressures, units are being preferred by many homebuyers.”

“In certain suburbs,” she says, “unit prices have grown at more than double the rate of houses over the past year.”

Searches for units on realestate.com.au have also been trending upwards since mid 2020. They now make up close to 40% of all buy searches on-site.

Lieu says that, while the strong performance of units has been evident nationwide, there are areas where demand for units has been particularly high, resulting in significant price increases compared to houses.

In New South Wales, for example, the annual growth in unit values in Engadine, Wagga Wagga and Merimbula has outpaced houses by around 6 percentage points.

In Victorian, Safety Beach, Templestowe Lower and Warragul are examples of locations which have experienced stronger growth in their values compared to houses by considerable margins.

The largest difference in value growth between units and houses in Queensland was observed in the Brisbane suburbs of Waterford, Nundah and Waterford West. Units in Waterford and Waterford West increased at more than twice the percentage of houses in these suburbs in the past 12 months.

PropTrack says that, with housing affordability at its lowest level in three decades, it's to be expected that people are turning to more economical options, especially in suburbs where the gap between house and unit values is significant.

But Hotspotting analysis shows that affordability is NOT the only reason that demand for units is rising. More buyers are choosing attached dwellings for location, for lifestyle and also for safety and security at a time of growing concerns about escalating crime levels.

For all those reasons, each quarter Hotspotting publishes a national report titled The Rise and Rise of Apartments, in association with the leading real estate marketing company Nuestar.

And it proves, emphatically, the units are now a strong option for buyers seeking not only affordability, but strong capital growth as well.