Suburbs with falling home values tempting buyers,
In a market where many investor-grade units are losing value, buyers are cautioned against the temptation of a bargain.
Purchasing a seemingly discounted property could end up costing significantly more in the long run.
If a unit’s type, quality, or location is not in demand, its price may remain low for an extended period.
Even if the price drops by as much as 18.4% compared to its pre-COVID peak, the value might not recover.
According to Eliza Owen, CoreLogic’s head of Australian research, buyers should consider the quality, age, and location of a property.
Her report reveals that 65 unit markets in Sydney and Melbourne now have values below their previous record highs.
Owen explains that buildings from the mid- to late-20th century tend to offer better quality than newer constructions.
Recent apartment developments have left certain markets subdued, but the demand for quality units is expected to increase.
As apartment living becomes more common and houses become less affordable, there will be an uplift in demand for well-located, quality apartments.
Additionally, the supply of new apartments is decreasing, which will likely lead to a market boost in the future.
Mathew Tiller, head of commercial research at LJ Hooker, mentions this trend as contributing to future price growth.
Furthermore, there is now a widening gap between median unit prices and median house prices in Sydney and Melbourne.
The latest Domain figures show Sydney’s median house price is $1,654,668, compared to $815,258 for units.
Similarly, in Melbourne, the median house price is $1,024,243, while the median unit price stands at $572,491.
Suburbs where unit prices dropped the most from their highest point.
| Suburb | Difference from peak | Peak date | Current median |
|---|---|---|---|
| Epping, NSW | −18.4% | May, 2017 | $797,796 |
| East Melbourne, VIC | −17.2% | Nov, 2018 | $737,686 |
| Beecroft, NSW | −16.5% | Oct, 2017 | $968,057 |
| Abbotsford, VIC | −16.0% | Apr, 2017 | $534,165 |
| Sydney Olympic Park, NSW | −14.8% | Jun, 2017 | $748,964 |
| West Melbourne, VIC | −13.9% | Jan, 2018 | $515,858 |
| Kensington, VIC | −13.5% | May, 2017 | $548,655 |
| Granville, NSW | −12.8% | Sep, 2015 | $523,568 |
| Middle Park, VIC | −12.5% | Jun, 2017 | $807,790 |
| Armadale, VIC | −12.4% | Apr, 2018 | $658,967 |
| Merrylands, NSW | −12.2% | Oct, 2017 | $513,593 |
| South Melbourne, VIC | −11.9% | Dec, 2017 | $593,455 |
| Cairnlea, VIC | −10.8% | Apr, 2018 | $444,903 |
| Harris Park, NSW | −10.7% | Sep, 2015 | $478,481 |
| Parramatta, NSW | −10.2% | Jun, 2017 | $611,537 |
| Guildford, NSW | −10.1% | Oct, 2017 | $480,669 |
| Parkville, VIC | −9.9% | Jun, 2017 | $590,799 |
| Burwood East, VIC | −9.9% | Jun, 2017 | $689,698 |
| Regents Park, NSW | −9.9% | Sep, 2017 | $484,785 |
| Chatswood, NSW | −9.7% | Jul, 2017 | $1,151,473 |
“There are some good buying opportunities available, as long as the property’s fundamentals remain strong,” experts suggest.
Houses have been more popular since COVID, but the low supply has created higher demand for units.
According to the CoreLogic report, Epping in Sydney had the biggest drop in unit values, falling 18.9% from its May 2017 peak.
Similarly, Sydney Olympic Park experienced a 14.8% decrease in unit prices during the same period.
In Melbourne, areas with many units, like the CBD, saw an 8.4% drop in value.
Docklands followed with a 5.1% drop, while Southbank experienced a decline of 4.2%.
Abbotsford and East Melbourne saw even larger drops of 16% and 17.2%, respectively.
Eliza Owen mentions that investor activity has increased in Queensland, Western Australia, and South Australia, where capital growth is strong.
These states have seen the strongest growth in more affordable parts of the market, attracting more investors.
Investors often follow areas with capital growth, which is why these states are now experiencing a boost in interest.
In contrast, falling unit values in Victoria and NSW are creating opportunities for buyers.
Dr. Diaswati Mardiasmo, chief economist at PRD Real Estate, suggests that Melbourne’s values have not fully recovered since the pandemic.
While Sydney’s market bounced back faster, prices have now softened, offering new opportunities for potential buyers.
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“When buying units for investment, don’t focus solely on those that have experienced the largest price declines,” she advised.
There could be other reasons why they might never recover, such as location or property type.
For example, an old, dark studio unit will never be as popular as two- or three-bedroom apartments.
These larger apartments generally provide better returns and are more likely to attract renters or buyers.
Rich Harvey, a leading buyers’ agent at propertybuyer.com.au, agrees that declining unit prices can make them appealing.
However, he emphasizes that the units should still be of good quality and located in the right areas.
He also prefers boutique blocks, typically consisting of 10, 20, or up to 30 units.
Such smaller blocks tend to have less competition, making them a better option for potential investors.
Harvey suggests choosing units with architectural beauty or in older art deco buildings to add value over time.
Despite current market conditions, there are good counter-cyclical investment opportunities available for savvy investors.
Harvey believes that now presents a favorable buying window, but only for the right kind of property.
It is essential that the unit is in an area where new stock is limited or no new supply is being built.
