Author: Nila Sweeney of AFR
Inner Melbourne apartment markets are defying the wider housing slowdown with suburbs such as West Melbourne posting as much as 6.5 per cent growth in the first quarter, as buyers seek more affordable dwellings.
During the first three months of the year, Melbourne’s median unit price fell by 0.2 per cent, but apartments in East Melbourne notched up a 6.2 per cent rise, according to CoreLogic analysis.
Apartments in Parkville also defied the downturn, with median prices rising by 5.1 per cent. Kensington was up by 4.5 per cent, Carlton by 4.4 per cent and Southbank by 4.2 per cent.
In Sydney, apartment prices in Eastgardens in the eastern suburbs rose 4 per cent, while Terrigal and Hamlyn Terrace on the Central Coast climbed by 6.5 per cent.
Eliza Owen, CoreLogic’s head of research, said the main tailwind for the unit segments of Sydney and Melbourne was the return of overseas migration.
“Since COVID-19-related travel restrictions eased in February, overseas arrival numbers have been rising quickly, which will buoy the unit markets,” she said.
“Inner Melbourne’s performance could also come down to relative affordability of higher density unit markets.”
Nerida Conisbee, Ray White’s chief economist, said Melbourne’s inner-city apartment markets were ones to watch this cycle.
“Inner Melbourne has lagged the rest of the market because of prolonged lockdowns, so I think these areas will have a bit more momentum than elsewhere,” she said.
“Foreign students are coming back, office workers are returning and the retail precinct is slowly but surely coming back to life. This means more people will return to live in the CBD and this will push rents and values up.”
Swan Hill, in regional Victoria, notched 14.4 per cent – the highest quarterly growth recorded across all markets.
The median unit price in Oxenford on the Gold Coast jumped 14.3 per cent. It rose by 11.3 per cent in Noosaville on the Sunshine Coast and by 14.2 per cent in Bunbury in regional WA.
“Units in coastal areas such as the Gold Coast, Sunshine Coast and Central Coast would be rising on the back of a long period of moderation in apartment development from around 2016,” Ms Owen said.
“In the current market, they’re likely to be popular as a relatively affordable entry point to these desirable markets.”
Looking ahead, the unit market may be more resilient compared to houses as the property market inched toward the downswing phase of the cycle, Ms Owen said.
“Unit capital growth cycles have historically seen less volatility than houses, and as a result, the downswing in prices is expected to be less than that in the detached house segment,” she said.
“Unit stock is also generally more affordable relative to detached houses in the same area, and a downturn in demand may be partially offset by the fact that units are a more viable option amid housing affordability constraints.
“The investment proposition for units is becoming slightly more favourable in terms of rental return, with unit rents rising faster than capital growth, and faster than detached house rents.”
Credits to Author: Nila Sweeney of AFR