Unit prices in most capital cities are likely to fall following unprecedented building while house prices will hold up over the next three years, in a growing divergence in the great Australian dream.
The yearly QBE Housing Outlook, to be released today, found unit prices in Sydney were forecast to fall 3.8 per cent by 2020, including a 0.6 per cent fall next year — expected to be the first price drop for units in the NSW capital since a slide of 0.1 per cent in 2008.
Based on BIS Oxford Economics analyses, the report also predicts the median unit price would fall 4.8 per cent in Melbourne, 7.2 per cent in Brisbane, 0.6 per cent in Perth, and 3.2 per cent in Darwin in the three years to 2020.
In Adelaide unit prices are tipped to increase 3.2 per cent, with Hobart to rise 8.7 per cent and Canberra 2.4 per cent.
House prices are tipped to rise in capital-city markets in the same three-year period, except for a 0.2 per cent drop in Sydney and 0.9 per cent in Darwin, contrasting with double-digit increases for Melbourne, Hobart and Canberra.
QBE Lenders’ Mortgage Insurance chief executive Phil White said the difference between house and unit prices would continue to grow. “What we’re seeing is it becoming more dramatic and more accentuated,” he said.
Units have accounted for 46 per cent of building starts in Australia in the past five years, up from 33 per cent in the decade to 2012. In the past five years about 94,000 units were built a year, compared to 110,000 freestanding homes.
Mr White said although unit development tended to be “feast or famine” and despite unprecedented construction, any excess stock would likely be absorbed by medium-term population growth. Investors are expected to play a diminished role in the market, while first-home buyers are growing as a proportion of buyers. Mr White said apartments would also become an increasingly dominant form of housing as people sought convenience or affordability.
In Sydney, median house prices are tipped to stagnate across three years at $1,178,000 while units will drop 3.8 per cent to $760,000.
Following higher population growth in Melbourne, predictions of an oversupply of units have been scaled back but the outlook remains for a 4.8 per cent decline to a median price of $535,000, while houses are expected to rise 10.2 per cent to $940,000.
In Brisbane, houses are tipped to appreciate 7.1 per cent to $590,000, while units are expected to lose 7.2 per cent to $385,000.
Canberra houses are forecast to perform the best, with a 16.3 per cent price rise to $750,000.
The report found prices in Queensland and WA regional mining towns had bottomed out in the past 12 months, with rental vacancies tightening in Mackay and more sales in WA’s Port Hedland and Karratha.