Australia’s Property Market: Signs of Recovery and the Growing House-Unit Price Gap

Australia’s property market is showing signs of recovery, with the latest reports indicating an upturn in property sale settlements and a widening gap between house and unit prices. According to Rommel Lontayao, writing for PEXA’s 2023 Property Insights Report, the Australian property market saw over 670,000 properties changing hands throughout 2023, totaling more than $613 billion in value. Despite a 9.1% reduction in overall transaction value compared to the previous year, the final quarter witnessed 188,000 national transactions—the highest quarterly volume for the year, indicating a potential resurgence in buyer confidence and market recovery.

Mike Gill, head of research at PEXA, noted, “The recovery in settlement volumes in the latter months of 2023 suggest the market may have reached a turning point and buyer confidence is returning.” He further predicted that sales volumes are likely to continue recovering through 2024, especially if inflation decelerates, allowing the Reserve Bank of Australia (RBA) to maintain or even reduce interest rates.

Concurrently, a report by Daniel Jeffrey, citing CoreLogic’s latest data, highlights a significant increase in the gap between house and unit prices, reaching a record high. The average house now costs $293,950 more than the average unit, a disparity fueled not by a decline in unit prices but by a more substantial surge in house costs. This “house premium,” which has jumped from 16.7% in March 2020 to 45% recently, is attributed to the increased demand for more space and the capability to live remotely, spurred by the pandemic.

Tim Lawless, research director at CoreLogic, observed, “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.” This trend underscores the evolving preferences of Australian homebuyers, with significant implications for the market’s future dynamics.

Sydney leads the cities with the highest house premium, followed by Canberra, Adelaide, Brisbane, Melbourne, and Darwin, indicating a widespread pattern across the country. This divergence in property values is pushing more potential homeowners towards apartments, especially those looking for their first home or belonging to lower-income households, as noted by Lawless.

As Australia navigates these changing dynamics, the property market’s resilience and adaptability remain key factors in its long-term health and sustainability. With a recovery in transaction volumes and evolving buyer preferences, the market is at a crucial juncture, poised for further developments in 2024 and beyond.

References:

Rommel Lontayao, “Is the Australian Property Market Recovering?”, PEXA’s 2023 Property Insights Report.

Daniel Jeffrey, “Gap between house and unit prices soars to record high as Aussies seek out more space”, CoreLogic Data Analysis.