Property price growth highest since 1989

Apartment prices are growing but struggle to keep up with house prices. (Source: Getty)

The gap between house prices and apartment prices is at an all-time high, making it harder than ever for Aussies to upsize.

The disparity between unit and house prices hit 28.3 per cent in January, despite double-digit annual growth for both houses and units.

CoreLogic’s new monthly Unit Market Update shows units recorded an annual growth rate of 14.3 per cent in the 12 months to January while house values rose 24.8 per cent over the same period.

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When combined, it’s Australia’s highest annual dwelling growth rate since 1989.

Although house growth has traditionally outpaced unit growth over the past decade, the performance gap has been notably higher, thanks in part to COVID-related demand shocks disproportionately affecting unit demand, CoreLogic research analyst Kaytlin Ezzy said.

“The annual performance gap between houses and units began to narrow in the final three months of last year, in part due to the lifting of lockdowns and border restrictions as well as increasing affordability constraints diverting demand towards the medium- to high-density sector,” Ezzy said.

“However, in January we saw that annual performance gap start to widen again, which could, in part, be explained by the disparity between advertised house and unit supply.”

Ezzy said shortages in listings throughout COVID helped fuel growing house prices by creating a sense of urgency among buyers.

And, despite rising inflation, the prospect of a rate hike in late 2022, affordability constraints and tighter lending restrictions, Australia’s unit market may benefit from some tailwinds in 2022.

“Three of the eight capital cities now have a median house price in excess of $1 million and the gap between national house and unit values is at an all-time high,” Ezzy said.

“It is likely affordability constraints will gradually pull some demand away from houses towards

more affordable units and, with international borders opening this month, Australia may gradually see a return to pre-COVID levels of migration.

“As most migrants initially rent in Sydney or Melbourne this could help bolster rental demand in those markets hardest hit by the pandemic which, in turn, could boost investor demand and, ultimately, unit prices.”

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