Upgrading from unit to house has never been more expensive

161 views 2021-10-25 13:01:26

Apartment owners upgrading to detached homes are being forced to dig deeper into their pockets as the premium for houses over units blows out to a record high nationwide because of strong demand and low supply, analysis by CoreLogic shows.

The price gap between Sydney houses and apartments has now widened to 59 per cent – up from 54.2 per cent in July. This comes after house prices jumped by 28.9 per cent in the 12 months to September – more than double the 11.6 per cent gain in unit values.

At 59 per cent, or $486,781, the gap between what it costs to buy a median house compared with a median apartment has never been wider in Sydney. Other capital cities are also seeing record gaps.

The growing gap has been a challenge for apartment owners such as Monique Channells-Baker and Scott Baker who have been looking to upsize to a house for the past five months.

“The market has shifted significantly since we started looking seriously. Prices have risen rapidly and we’ve been priced out every time we find a house we like,” Ms Channells-Baker said.

“We’ve been pushed further out from where we wanted to buy originally because other buyers were willing to pay more than we’re prepared to.”

The couple engaged buyer’s agent Amanda Gould at HighSpec Properties to help them find their home, but even with professional help they found it tough to navigate the fast-moving house market.

“The biggest challenge we’re facing is the adjustment we’ve got to make in terms of how much we’re willing to pay,” Ms Channells-Baker said.

“It’s really hard to wrap our heads around how a house priced at $2.3 million will sell at $3.3 million at auction. Every time we find a house that we thought we can afford, we get knocked down.

“So it’s that massive shift in what we thought we could get for our money versus what we could actually get.”

It is a similar picture for upsizers elsewhere in the country, with houses now fetching a 34.4 per cent premium over units nationally – a 3.9 percentage point rise in three months.

In Melbourne, houses are now worth 55.3 per cent more compared with apartments – up by 2.9 percentage points since July. In Brisbane, the price gap between houses and units has widened by 6.7 percentage points to 64.9 per cent.

“Demand has been massively outstripping supply for houses and townhouses, yet it’s been more balanced for units and apartments,” said Melbourne-based buyer’s agent Cate Bakos.

“Many buyers are getting caught in a moving market while they are trying without quick success to buy in a heated and competitive upgrader market.”

The pandemic had shifted homebuyers’ dwelling preferences towards houses as the lockdowns heightened people’s needs for more space. The apartment oversupply in areas such as the Melbourne CBD has also dampened price growth for the sector.

Eliza Owen, CoreLogic Australia head of research, said the upswing was making it harder for people wanting to upgrade from an apartment to a house.

“The rapid increase in house values – which are already inherently higher than unit values – mean that while it would still be possible for many apartment owners to upgrade, they may be able to put less of the value and equity in their apartment toward the value of a new house,” she said.

Ms Channells-Baker said they were hoping the location of their unit in Cammeray, on Sydney’s lower north shore, would deliver them a good price when they sell it.

“Our unit has probably gone up in value considerably from when we bought it because it’s in a good location, but there’ll be a big gap between what we will sell the unit for and what we will buy the house for. I think that’s just the unfortunate part of the market now.”

Ms Gould from HighSpec Properties said apartment upgraders would need to adjust their expectations if they wanted to buy a standalone home.

“House prices have jumped a lot, but some buyers are not adjusting their expectations, so there’s a mismatch,” she said.

“The market has moved significantly, so houses that were worth $2.8 million five months ago are now $3.3 million. I think if your budget doesn’t increase to match the market, you’re either going to have to compromise on the size of the property, or the location of the property to get what you want.”

But there were also risks of simply pursuing a standalone home without considering the location, said Jeremy Sheppard, head of research at Select Residential Property.

“If buyers are working from home, then it doesn’t really matter where they live so long as it is affordable and has decent internet speed,” he said.

“Usually, this type of carefree decision could lead to prolonged periods of stagnant price movement if they buy in areas where supply can easily be added through infill development.”

This article is from Australian Financial Review, please click the following link for the original article: https://www.afr.com/property/residential/apartment-upgraders-pain-as-house-prices-soar-20211020-p591gt


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