There’s a new loser in Australian property death match.

An apartment used to be a pretty solid investment. A snazzy apartment in the right place was touch and go with the value of a nearby house, four years ago.

Then Covid-19.

Then the step-change to the new working/living pandemic paradigm pandemic.

Then the fiasco around shoddy high-rise apartment buildings which wrenched confidence and accountability out the high-rise window.

And voila.

Now the value of an Australian house Vs. an Aussie apartment is night and night with a lot of daylight in between.

That’s according to new work out of the House of CoreLogic, where research director  Tim Lawless says there are even bigger factors behind the tectonic shift in the new value divide.

Underlying land value, supply and demand, the post-pandemic desire for more space – all contribute to a substantially larger rise in house values relative to unit values over the past four years.

At the onset of the Great Coughing circa March 2020, Tim says that the Aussie house premium – or the difference between median capital city house and unit values – was just 16.7%.

Fast forward to right now, and that premium has jumped to 45.2% or $293,950.

And the revelations come just as national auction rates – the preferred measure for the assessing the temperature of the residential property market at a given time – absolutely surged last week.

Around the country there were some 2,044 auctions held, the highest volume of auctions so far this year.

Demand from buyers has kept pace with the pick-up in activity, with the preliminary clearance rate coming in at 75.4%, down slightly from the previous week (76.2% which revised to 70.3% on final numbers).

For some context, the preliminary clearance rate settled in the mid 60% range at the end of last year, and final clearance rates were in the mid 50%s.

With the preliminary clearance rate holding above 73% for the past three weeks, Tim says it’s probably fair to say there’s more to the spiking auction results than mere early-year seasonality.

Instead, it appears some confidence has returned to the auction markets amid falling inflation and a growing expectation that lower interest rates later this year could see housing price growth accelerate.

Sydney recorded 688 auctions last week, returning a preliminary clearance rate of 81.7%, the highest preliminary outcome since mid-October in 2021.

This marked the second consecutive week that Sydney’s preliminary rate held above the 80% range, with the previous week’s early rate of 80.4% revising to 75.4% at final numbers.

Melbourne held 961 auctions, with 72.2% selling at auction so far. Melbourne’s preliminary clearance rate has held above the 70% mark through the year-to-date, but was down slightly compared to the week prior (73.1%, revised to 66.9%).

Across the smaller capitals, Brisbane recorded the busiest auction week, with 169 homes taken to auction, followed by Adelaide (140), Canberra (74), Perth (9) and Tasmania (3).

Adelaide recorded the highest preliminary clearance rate at 76.1%, followed by Brisbane and Canberra, with early success rates of 74.1% and 55.6% respectively. Just one auction result has been reported so far for both Perth and Tasmania, both were successful.

This week is set to see a further pick-up in auction activity, with around 2,800 homes currently scheduled to go under the hammer.

 

Suburbs with the largest and smallest house premium revealed

Tim’s team has burrowed into the places where this newest property differential is most prominent.

Lawless says while houses have historically attracted a price premium over units, and have shown a higher rate of capital gain, several factors have led to the accelerated value growth for detached dwellings over recent years.

“The house premium rose sharply through the pandemic upswing as more people sought out space and were more willing and able to live further afield in our cities.

“While we saw the premium contract through the early part of the rate hiking cycle as house values fell more than unit values, across the combined capitals the gap between house and unit values has since rebounded to a new record high as house values once again rise at a faster pace than units.”

Since the onset of the pandemic to January this year, capital city house values have increased by 33.9% or by $239,000.

Unit values over the same period are up 11.2% or $65,235.

A similar trend has played out over the past 12 months with house values up 11.0% ($93,552) while unit values are up a lesser 6.9% ($41,789).

 

Sydney’s house premium is at a premium

Across the capital cities, Sydney has seen the largest expansion in the house premium since the pandemic, with the gap between house and unit values widening by almost 36 percentage points, catapulting it from sixth to first position on the premium leagues table.

Melbourne, Perth, Adelaide and Brisbane have all seen their house premium grow between 15 and 16 percentage points over the same period, while Darwin has seen its house premium reduce by 12.2 percentage points.

“Over the past 12 months, we see a different picture. While Sydney tops the table again for largest 12-month change in premium followed by Canberra, several cities have seen the premium shrink back a little, including Brisbane and Adelaide. This could be reflective of homebuyers seeking out more affordable housing options, which has diverted more demand towards units,” Lawless reckons.
 

Top suburbs for largest and smallest house premium

Across the combined capitals, five of the suburbs with the largest house premium are in Sydney, three are in Melbourne and two in Perth.

Tim says you’ll be finding the largest house premiums in the very, very well-to-do (affluent) markets.

 

Top 10 Suburbs by largest house premium – combined capitals

“In Sydney the largest premium for a house is at Bellevue Hill with a 525% premium for houses over units. In Melbourne it is Armadale with a 372% premium and in Perth it is Mosman Park with a 431% premium.

“Homebuyers attracted to these blue-chip suburbs who can’t afford a freestanding home may be attracted to the significantly more affordable price point to get into a high-end suburb.”
 

Top 10 suburbs by smallest house premium – combined capitals

“Conversely, the suburbs with the smallest differential in price between a house and unit may offer good buying opportunities for those able to stretch themselves to secure a piece of land without the hefty premium we’re seeing more broadly across many parts of our cities.

“With houses typically yielding a stronger capital gain outcome over time, these suburbs with a lower house premium could be strong investment opportunities.”

 

 House prices out of reach

“House prices have moved out of reach for a growing portion of the population, especially those seeking a first home or lower income households. With housing affordability remaining a key challenge across Australia, the substantially lower price points across the medium to high density sector are likely to become increasingly in demand as buyers become more willing to sacrifice space for proximity to essential amenities.

“Alongside lower prices, medium to high density housing options are often strategically located close to transport networks, major working nodes and high amenity precincts,” he said.