Is it time for quality apartments to bounce back?

For over a decade now, we have witnessed median house price growth outpacing unit growth.

Historically, this wasn’t always the status, and this dated Corelogic chart shows some 25 years of house and unit price movement nationally staying reasonably in step.

However, it is interesting having a retrospective look at a ten year old case study.

Ten years ago I had an interesting investor brief. I was working with a client who had a circa $650,000 budget and a capital growth target. His familiarity and appetite for a leafy south-eastern suburb supported a character or art deco two bedroom unit and we circled in on a beautiful property in Camberwell. After careful comparable analysis we decided on a budget upper limit of $632,000.

Unfortunately, we were outbid by another advocate. The property sold for $635,000 and rented out shortly thereafter for $460pw.

As disappointing as the auction was, we continued with the search and tried our best to find another rare gem like the one we had missed; no mean feat, as they are tightly held and are not in abundance in these leafy suburbs outside of Elwood and St Kilda.

I received an interesting call from an inner-west agent in the proceeding weeks though, and the property he had passed in was quite a surprise. It too, was a period era dwelling, but instead of a strata (unit), this property was a Victorian single fronted cottage on the other side of our city. Located in Seddon, 6km from Melbourne’s CBD, and situated in a beautiful leafy street, I felt compelled to share this wildcard property with him.

The interesting thing was threefold: the dwelling price tag was only slightly higher than that of the Art Deco unit we had missed at auction. The capital growth prospects were, in my view more favourable given the total absence of strata. The surprise was the rental potential. Typically, a unit will offer a more compelling rental yield than a house, but in this case it was the same.

The capital growth trajectory has been interesting for both; the Camberwell unit has certainly not outperformed the Seddon house, and for a variety of reasons, but the disparity now between unit and house prices is the greatest it has been in decades.

WIth a return to the workplace, (albeit hybrid for many), a state government investment in public transport infrastructure, and the question of housing affordability, is it time for units to shine again?

Time will tell…