Throughout the current downturn, the one solace to many homeowners was the strong value growth experienced throughout the upswing, with the majority of markets still recording property values well above the levels recorded at the beginning of the pandemic.
Nationally, unit values remain 7.3% above the levels recorded in March 2020, despite declining -6.1% over the past nine months, while national house values are still 17.3% higher. Figure 1 shows the cumulative change in capital city house and unit markets since the onset of COVID in March 2020.
Other highlights from this month's Unit Market Update include:
- National unit values saw a slight re-acceleration in the pace of monthly declines, from -0.8% in December to -0.9% in January, taking values -5.3% lower over the year to January.
- Nationally, unit values remain 7.3% above the levels recorded in March 2020, despite declining -6.1% over the past nine months, while national house values are still 17.3% higher.
- Most capital city and rest of state markets remain between 10% and 50% higher than pre-COVID values, however a few markets are close to wiping out their COVID gains such as Sydney units (21 basis points above March 2020), and Melbourne's house and unit indexes (36 basis points and 18 basis points higher, respectively).
- Since peaking in November 2021, Sydney unit values have fallen by -10.4%, equivalent to a nearly $90,000 fall in the median unit value. Melbourne unit values have fallen -6.1% below their April 22 peak, and Melbourne house values are down -10.8% since peaking in January 22.
- Adelaide’s unit market recorded its first decline in two years, with unit values slipping -0.1% in January.
- Across regional markets, monthly unit growth remained positive across Regional WA (1.9%) and Regional SA (0.3%), while Regional Tasmania (-1.4%), Regional Victoria (-0.9%), Regional NSW (-0.7%) and Regional QLD (-0.6%) saw unit values fall in January.
- Listing were off to a slow start in January, with freshly advertised capital city unit listing over the four weeks to January 29 down -18.4% compared to this time last year and -16.4% below the previous five-year average.
- National unit rental values rose 1.0% in January, higher than December’s 0.8% increase. Over the same period, growth in national house rents continued to ease, narrowing the gap between median house and unit rents to just $50 per week.
Outlook for the unit market
Following a temporary reprieve in interest rate rises in January, the RBA's 25 basis point increase announced in February was accompanied by a marked change in tone. Previously optimistic, the Board reiterated its commitment to fighting inflation, noting that further rate hikes would be needed to get inflation under control. With many economists now expecting the cash rate to settle closer to 4% than 3%, the outlook for unit values, and the broader property market, remains skewed to the negative.
For prospective buyers, the cumulative decrease in borrowing capacity has largely offset the affordability benefit seen by falling values, further limiting their ability to enter the housing market. For recent borrowers, the cumulative 325 basis point rise is higher than the 300 basis point serviceability buffer they were assessed under, putting these borrowers into uncharted territory.
However, relative affordability continues to be an important factor shielding unit values from larger declines. Despite the acceleration in national units' monthly decline trend, unit values are still dropping at a slower pace compared to house values. At $587,360, the average unit is approximately $167,680 more affordable than the average house ($755,040), which should continue to support demand at a time of reduced borrowing capacity.
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Meet Kaytlin Ezzy
Economist
As an economist, Kaytlin is a key member within CoreLogic’s research team. Highly efficient and flexible, she specialises in collating large and customised data sets, data visualisation and residential data reports.
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