Despite improving affordability in some areas, certain unit markets in Sydney and Melbourne are failing to attract buyers, according to new research from CoreLogic.
CoreLogic’s Head of Residential Research Australia, Eliza Owen, said the analysis identified 65 unit markets where values remain below record highs from the 2010s.
“While most other unit markets in the country have made a recovery from the supply glut in apartments through the 2010s, many Sydney and Melbourne markets are still underperforming,” Ms Owen said.
She said that Sydney accounts for the majority of these markets, with 51 unit markets sitting below their 2017 or 2018 peaks.
“Across the entire Sydney unit market, values have risen 8.7 per cent since mid-2017,” Ms Owen said.
“But suburbs like Epping stand in stark contrast, which currently has a median unit value of just under $800,000, and the value of the unit market is down -18.4 per cent from a peak in May 2017.”
In Melbourne, the situation is similar, particularly in the inner city.
“Values across the Greater Melbourne unit market have increased 6.5 per cent from mid-2017 to September this year, but across the Melbourne City SA3 region, which accounted for 8 suburbs on this list, unit values are still -8.6 per cent below a high in 2017,” she said.
Ms Owen said the underperformance was due to an oversupply of investment-grade units built in the 2010s.
“This period saw the investor share of new housing finance hitting record highs of 46 per cent in 2015,” she said.
“Foreign investment purchases of off-the-plan apartments rose, and strong investor uptake of interest-only loans for tax purposes possibly added to speculative activity in the apartment sector.”
The research also revealed that many unit owners in these areas are willing to sell at a loss.
In the Melbourne City Council area, 42.2 per cent of unit owners incurred a loss from selling in the June quarter of this year.
Auctioneer and real estate trainer, Andy Reid said the unit market in Melbourne has been struggling for many years.
“Docklands turned the apartment market into a disaster zone 15 years ago,” Mr Reid said.
“That’s been a constant because of the complete oversupply kicking around.”
He said attention has slowly started to improve with the apartment market because of affordability.
“The median unit price has actually advanced in Melbourne, while the median house price has dropped,” he said.
“People are starting to get a bit more of an appetite for apartments.
“We’re in the early adopter phase of apartments becoming a much more acceptable and viable option for Melbourne homeowners.”
