#24

House Prices Slipping? The Gap Between Houses and Units is Narrowing

The once-record gap between house and unit prices is beginning to close, signaling a potential shift in the Australian property market.

Historical Trends

In 2014, houses in capital cities were only 9% more expensive than units, with an average difference of $44,000. By 2020, this gap had increased to 14%, or around $80,000. By April 2024, the disparity had surged to an extraordinary 45%, with houses costing $285,000 more than units on average, according to PropTrack data.

Factors Behind the Surge

Anne Flaherty , an economist at REA Group , attributes this premium to the pandemic-driven housing boom. Low interest rates during the COVID-19 period boosted borrowing capacity, and the demand for more space led buyers to favour houses over units, inflating house prices significantly.

The Shift Begins

However, this trend is starting to reverse. By August 2024, the price gap had reduced slightly to 43%, or $280,000. This shift may be driven by stronger performance in the unit market, with new developments offering more affordable options compared to existing properties. As units become more appealing, the gap could continue to close.

Key Takeaways:

• The house-unit price gap reached a record 45% in April 2024.
• By August, the gap had slipped to 43%.
• New unit developments could help further reduce the price difference in the coming months.

With this shift underway, it will be interesting to see whether units continue to gain ground in 2024.

Lenders Urged to Simplify Refinancing to Boost Competition and Save Borrowers Thousands

Mortgage brokers are helping Australians save an average of $2,976 per year by guiding them through the refinancing process, according to the Mortgage & Finance Association of Australia (MFAA) . In light of this, the MFAA is advocating for lenders to make refinancing easier for all borrowers.

Push for a Streamlined Process

In its submission to the Senate inquiry on home ownership, the MFAA has called for a faster and more transparent loan discharge process, which would allow borrowers to switch to better mortgage deals more efficiently.

Key Recommendations:

• Simplified Discharge Process: The MFAA supports recommendations from the ACCC for a more efficient and streamlined loan discharge system.
• Mortgage Broker Involvement: They are urging lenders to allow mortgage brokers to act on behalf of customers (with consent) during the discharge process.
• Increasing Competition: By reducing barriers to refinancing, borrowers will benefit from a more competitive mortgage market, enabling them to make smarter financial decisions.

The Refinancing Trend

In the past year, Australians refinanced $199.4 billion in home loans with external lenders. With an improved discharge process, these savings could increase, benefiting even more borrowers.

This push for reform could significantly enhance competition in the mortgage market, making it easier for borrowers to access better deals and reduce their financial burdens.

Auction Market Update: Record Listings Push Clearance Rates Lower

An influx of auction listings over the weekend has led to mixed results across Australia’s major cities, with increased competition contributing to a decline in clearance rates.

National Snapshot

• National Clearance Rate: 62.1%, down from 63.3% last weekend and 66.3% this time last year.
• Total Auctions: 2,499, a sharp increase from 1,754 the previous weekend and 1,810 at the same time last year.

Key Insights:

• The rise in listings gives buyers more choice but increases competition for sellers.
• Despite lower clearance rates, auction volumes were notably high, indicating continued strength in market activity.

Sydney Market Holds Steady

Sydney’s auction clearance rate remained relatively stable at 67.4%, just shy of last week’s 67.5%, but down from 73% a year ago. The city saw a substantial increase in listings, with 1,052 auctions held—more than double last weekend’s 461.

• Median House Price: $1,567,500, a 9.2% drop from last year.
• Top Sale: A five-bedroom house in Hunters Hill sold for $9.3 million.
• Most Affordable: A two-bedroom unit in Liverpool sold for $530,000.

Melbourne Sees a Sharp Drop

Melbourne’s clearance rate dropped to 60.7%, down from 63.5% the previous weekend and significantly lower than last year’s 67.2%. The city hosted 1,066 auctions, consistent with last week but a noticeable rise from 860 the previous year.

• Median House Price: $980,000, still 5.1% lower than last year.
• Top Sale: A five-bedroom home in Brunswick sold for $4.15 million.
• Most Affordable: A one-bedroom unit in Preston sold for $380,000.

Key Takeaway:

While increased auction volumes provide more opportunities for buyers, sellers are facing tighter competition, resulting in lower clearance rates. Sydney remained stable despite the surge in listings, whereas Melbourne experienced a notable decline.