Best (and worst) housing markets of the year - Australian Financial Review - 12.12.2024

Units vastly outperformed houses this year and are on track to dominate in 2025 as demand soars for affordable homes amid high interest rates and surging values for freestanding homes, CoreLogic’s Best of the Best report shows.

This year’s top 10 best performing unit markets racked up between 40 per cent and 53 per cent capital gains, while the house markets with the sharpest increases rose between 34 per cent and 38 per cent.

The Notrella at 142 Wolseley Road, Point Piper, was this year’s top sale according to CoreLogic. 

Unit values in this year’s fastest-rising suburb, Dolphin Heads in the Mackay region, surged by 52.8 per cent in the past 12 months to November. By comparison, the country’s best performing house market, Beachlands in the Geraldton region in WA, climbed by 38.4 per cent.

CoreLogic’s head of research, Eliza Owen said growth momentum for apartment values would carry through next year as poor affordability continued to constrain many home buyers.

“While borrowing capacity may improve slightly if rates come down next year, affordability is still a big obstacle for many buyers,” she said.

“There’s still an extraordinary premium on house prices in some cities, particularly Sydney which is sitting at around 70 per cent. So I think we’ll continue to see demand being diverted to units.

“I think 2025 could be another good year for units, where they could outpace house price growth.”

Apartment growth has outperformed houses in many capitals this year particularly in Brisbane where house prices are now close to $1 million on average.

Brisbane’s top performing house markets such as Leichhardt, Brisbane City, and One Mile gained 23 per cent on average. By comparison, unit prices rose by around 42 per cent on average across Loganlea, Bethania and Waterford West.

Zoran Solano, buyer’s agent at Hot Property Buyers Agency in Brisbane said buyers were becoming price sensitive and were more willing to look at units than houses.

“Brisbane is no longer the cheap market it once was so rather than spending several millions on a large Queenslander, more people are now buying units or townhouses, which are easier on their budgets,” he said.

In Melbourne, unit values in top performing markets such as Parkville, Carlton and Sydenham climbed between 7 per cent and 10 per cent in the past year. By contrast, house prices in the city’s fastest rising suburbs such as Balaclava, Beaconsfield and Pearcedale increased by just 5 per cent at the most.

Capital gains for apartments are predicted to match or even exceed houses amid strong demand. Oscar Colman

Scott Kuru, co-founder of Freedom Property Investors, said the affordable end of the market will attract more demand once rates were cut.

“You are going to see even more competition for properties at the affordable end of the market as more potential buyers qualify for home loans, so expect strong price growth in the lower quartile to continue, not fizzle out,” he said.

Property research analyst Terry Ryder of Hotspotting said the unit sector has reached a turning point in terms of demand.

“We’ve been tracking this segment for the last 18 months, and we’re seeing what could be the biggest paradigm shift in real estate in the last 10 years or so,” he said.

“Apartments obviously don’t have a lot of land content, but they are outperforming on price growth purely through the weight of demand, and this demand is rising fast, so the old paradigm that the land content drove capital growth, I think people are going to have to rethink that.

“Apartments are much cheaper and therefore yields are higher, but investors are worried about capital growth. But once they realise that’s no longer true, I think we’re going to see more investors targeting units.”

Bellevue Hill held on to its pole position as the country’s most expensive suburb at $9.99 million median house price, followed by Vaucluse at $8.65 million, Rose Bay at $6.42 million and Dover Heights at $6.25 million.

Unlike last year when house prices in most expensive suburbs climbed by as much as 24 per cent in 12 months, this year, values tumbled by up to 8 per cent.

For units, Point Piper took the top spot with the median sitting at $3.11 million, followed by Darling Point, Millers Point and Barangaroo at $2.2 million.

Mosman continued to attract wealthy buyers who spent $1.65 billion snapping up 238 houses for $5.58 million apiece on average.

Unit buyers also targeted Surfers Paradise, splurging $1.2 billion on 1467 apartments worth $768,908 apiece on average. Central Melbourne units also pulled in strong demand, with 1347 apartments selling at $466,115 apiece on average for a total of $782 million.

An eight-bedroom, six-bathroom mansion at 142 Wolseley Road, Point Piper, in Sydney’s east was the most expensive sale this year at $51.5 million.

Houses in Noosa Heads notched up the highest increase in rents at 23.7 per cent, while houses in Collinsville delivered 12.6 per cent gross rental yields, the highest in the country.

Norseman in outback WA has the cheapest house at just $80,289 on average, while units were the most affordable in Laguna Quays in regional Queensland at $142,689 median price.

Melbourne dominated the list of the worst-performing house and unit markets, underscoring the city’s weak showing this year.

House prices in Chelsea, Doncaster, Dromana and Bonbeach slumped between 9 per cent and 10.2 per cent, while unit values in Sunshine, Frankston South, Carnegie, Murrumbeena and Caulfield South dropped by as much as 13.8 per cent.

Sydney suburbs Zetland and Cronulla were among the weakest house markets in the country, with values dropping by 9.7 per cent and 8.5 per cent respectively.

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