Melbourne home owners hoping to upsize face pressure as house prices soar

 

Melbourne home owners looking to upsize now have to stretch further to afford a bigger place than they did just six months ago, as prices for larger homes soar.

 

Apartments, often a modest entry into the market for first-home buyers, are increasing in value at a slower rate than houses, with the boom making it a challenge to upgrade.

 

Melbourne house prices soared by 7.3 per cent over the year to March, adding $66,000 to reach a record median of $974,000, Domain data shows.

 

Unit prices rose by only 3.5 per cent, adding $19,250 to reach a median of almost $568,000.

 

It has left a substantial gap in sale prices for upgraders to bridge, and experts say that gap is growing.

 

Domain senior research analyst Nicola Powell said while the difference in house and unit prices was not at the record levels reached in 2017, the affordability of upsizing to a house was being stretched.

 

“The difference [in price] is currently at 71 per cent across Melbourne and is edging higher,” Dr Powell said.

 

“What that means is that the leap from owning a unit to owning a house is harder than it was just six months ago.”

 

The difference in sale prices between houses and units is most evident in Melbourne’s expensive inner and middle-ring suburbs.

 

In inner Melbourne, a statistical region that spreads from Armadale to Ascot Vale, the median unit price is $570,000, while the median house costs $1.39 million – a gap of $820,000, Domain data showed.

 

The inner-south region, which includes Sandringham and Beaumaris, has a unit median of $675,000 and a house price median more than double that of $1.459 million, leaving a gap of $784,000.

 

By far, the biggest price difference is in the inner east, where the difference between buying an apartment and a house is a massive $935,000. The median house price is $1.615 million compared to $680,000 median for a unit.

 

The widening gap in prices in their area has been something Massimo Formica and his wife Yassaman Bahar have been watching after selling their two-bedroom townhouse in inner-eastern Glen Iris in March.

The couple and their two children are looking for a three-bedroom house around the same area, though their search has been difficult in the post-COVID-19 market.

 

“We’ve obviously benefitted from selling in a hot market, but even in the six weeks since we sold, prices have accelerated even further than we thought,” Mr Formica said. “There’s definitely a bigger gap between what we were considering [before we sold].”

 

It’s not just the growing prices but also the lack of new houses coming up for sale that has made it difficult for the couple.

 

They’re hopeful of finding a home in the inner east before they settle in July, but if not, plan to rent and keep looking.

 

While Mr Formica and Ms Bahar are happy to keep looking, some buyers have been changing their plans, moving either to suburbs further out or to regional Victoria where the price gaps aren’t as large.

 

Data shows the narrowest gap in house and unit median prices is in the north-west region, from Craigieburn to Sunbury, where the difference is just $166,200.

 

Buyers advocate Cate Bakos said she had been helping buyers find properties that would fit into their budgets after selling their apartment or townhouse.

 

“I think people who are concerned about the amount of finance they’ll need in the inner suburbs are moving to the outer suburbs or regional Victoria,” Ms Bakos said.

 

“A lot of people buying apartments can’t afford houses in Melbourne, but the capital growth is not as good, so upgrading to a house can be hard,” she said.

 

AMP Capital economist Shane Oliver said people now needed to borrow more to upgrade to a home in Melbourne, with high debt levels putting them at risk of future financial hardship.

 

“For people wanting to upgrade, that has become more expensive to do,” Dr Oliver said. “There is an argument for it if you can borrow at a much lower rate, but you’ll be in a lot more debt now than if you’d upgraded six months ago.”

 

Forty per cent of current housing loans were fixed-rate, meaning once that term ends, people could be left with much more to repay, even if fixing their rates again.

 

“There definitely could be a shock [for mortgage holders] down the track,” he said.

 

 

Ref: MELISSA HEAGNEY  | SENIOR JOURNALIST (on 08 May 2021). Melbourne home owners hoping to upsize face pressure as house prices soar. Retrieved from https://www.domain.com.au/news/melbourne-home-owners-hoping-to-upsize-face-pressure-as-house-prices-soar-1051549/#:~:text=Melbourne%20home%20owners%20hoping%20to%20upsize%20face%20pressure%20as%20house%20prices%20soar,-Melissa%20HeagneySenior&text=Melbourne%20house%20prices%20soared%20by,a%20median%20of%20almost%20%24568%2C000.

 

Images from internet