The gap between Melbourne’s house and unit prices has never been higher
Buyers across Melbourne are looking to upgrade their units for freestanding homes at unprecedented rates, and it’s forcing the price gap between the two types of dwellings into uncharted waters.
New data from the latest Domain House Price Report shows house prices across the city have risen three times faster than units over the past year.
Melbourne’s median house price now sits at $1,037,923 – up 16.8 per cent from September 2020 – the largest annual gain in the city’s median house price in 11 years.
Units, however, only rose by 6.1 per cent in the past year, with the average unit now setting buyers back $576,879.
This disparity between home and unit prices is now so large that the current gap sits at an unprecedented 80 per cent, equating to a dollar value of $461,044.
Areas across the city with the biggest gaps between house and unit prices were Melbourne’s inner south and inner east, which both showed a $900,000 difference between the two.
Many are ascribing this phenomenon to Melbourne’s world-record-breaking lockdowns, which have seen its five million-plus residents stuck indoors for a cumulative total of 282 days.
“Over the past year, there’s definitely been a premium paid for space. Buyers really have space at the forefront of their minds,” said Nicola Powell, Domain’s chief of research and economics.
Dr Powell added that buyers currently had more savings and disposable income due to the lockdowns. Because of this, she didn’t think the easing of restrictions in Melbourne would slow buyers down or change the desirability of a property with more space.
“I think there’s still much more room for growth, and I think what is going to be interesting post-COVID is we’re going to be using our homes differently,” she said.
“I think you’d be hard-pressed to convince people to go into an office five days a week, and for those who can still work in this hybrid way, it does mean we’ll use our homes differently, and I think the need for space is going to be greater than it was pre-pandemic.”
The need for a larger home compelled Daniel Groszek and Jana Chau to put their two-bedroom Bentleigh East unit on the market and dig deep to buy a townhouse in the same suburb.
“It was pretty simple – we needed more space. Having a newborn definitely made finding somewhere bigger a priority,” Mr Groszek said.
“Also, due to myself and Jana working full-time from home since the pandemic began, we felt as though we needed something more accommodating, where we could separate our professional and personal lives.”
However, the process of selling their unit and then finding a home within the young family’s budget proved laborious and, as the year progressed, prices kept going one way: up.
“It was painstaking. We spent six months looking before we found our new home, and by that stage, we’d gone along to at least half a dozen auctions where the actual sale price was several hundreds of thousands of dollars more than the guided estimate,” Mr Groszek said.
Mr Groszek and Ms Chau’s anecdotal experiences of sellers paying way above list prices for homes with extra space is far from unique.
“There’s no question we’re selling houses with land – and anything with a land component – for significantly more than precedented prices,” said Gary Peer, director at Gary Peer real estate.
“The market is still rising at an unexpected level. People through lockdown have made the decision to get more space, get more garden – we’re seeing an almost insatiable appetite for land, and it’s almost impossible to predict how much of a premium is going to be paid, week in and week out.”
Despite the rapid price rise of freestanding homes, Chris McNeill, director at Ethos Urban Melbourne, said there might be a silver lining for some buyers.
“What [the demand for space] has done, in a sense, is that in relative terms, it’s made medium and higher-density housing more affordable,” Mr McNeill said.
“Which means that, ultimately, those looking to enter the market may see opportunities in that area.”
Ref: JAMES ROBINSON (on 30 Oct 2021). The gap between Melbourne’s house and unit prices has never been higher. Retrieved from https://www.domain.com.au/news/the-gap-between-melbournes-house-and-unit-prices-is-growing-1099250/.
Images from internet