Apartment buyers must strike while the iron is hot: REA's Nerida Conisbee

Australian house prices are rising again with two exceptions: unit markets in Sydney and Melbourne. Declining unit prices are being driven by high levels of supply, problems in the rental market and foreign students not returning.

However, these declines are now fairly modest at a capital city level. In Melbourne, apartment prices are down 1.2% while Sydney is down 0.2% since the start of the pandemic. It is likely they will return to growth in the coming months.

At a suburb level, the impact of poor rental market conditions is more apparent, and prices have dropped considerably.

Topping the list for capital city unit market price declines is Carlton in Melbourne’s Inner North where the median price for units has dropped 22% over the past 12 months, reflecting the weak student rental market. It is possible declines in Melbourne’s Highett and Ormond are being driven by a similar trend.

Gungahlin, in the red-hot Canberra market, is surprisingly showing big declines in prices, down 20%.

Surprisingly weak conditions are also being seen in parts of the recovering Perth market. Mandurah, Mount Lawley and Fremantle units are all seeing price declines in excess of 10%.

In Sydney, high development areas such as Sydney Olympic Park and North Ryde are topping the list for price declines.

Probably the biggest surprise is Melbourne CBD, which has seen the most dramatic rise in vacant apartments in Australia. At present, prices remain steady.

While prices are well down on last year, housing market conditions are improving, and this will flow through to unit pricing over the next 12 months. For many of these markets, renters will also return, which will support values.

For now, if you are someone who is looking for an affordable property or consider yourself a counter-cyclical buyer, be prepared to take on a bit of risk and these areas may be worth a look.

Australian luxury property defies the downturn and global trend

We are continuing to see strong conditions for luxury properties around Australia. On realestate.com.au, views per listing for $10 million-plus properties have increased from 1,800 prior to the pandemic to more than 4,500.

Some of this may be to do with people being stuck at home and dreaming about beautiful homes, but price growth is now occurring, suggesting at least some of this search activity was from serious buyers.

While luxury is having its moment in Australia, globally it isn’t uniformly the case as shown by the latest Luxury House Price Index from Knight Frank.

Global gateway cities such as Paris, London, Hong Kong and New York are all seeing declining prices at luxury price points.

This is a little bit surprising given there seems to be a flight to safe assets more broadly and property, particularly in these markets, is generally seen to be very safe.

It may have more to do with how COVID-19 has impacted these markets, suggesting high net worth buyers may be looking at certain locations for health reasons, rather than to park their cash.

This certainly holds true for the city that is topping the list in Knight Frank’s report – Auckland. New Zealand has been one of the least impacted countries in the world in terms of COVID-19 infections and has also seen the biggest increase in luxury house prices over the past 12 months.

It also holds true, although to a lesser extent, in Australia. Melbourne luxury homes have still experienced a price increase, but at only 0.2% it is far less than Sydney and Perth at 2.3% and 2.2% respectively.