What is happening in the unit market?
March 27, 2015 / Written by Rich Harvey
Let's be clear: If you're buying Australian investment property for the long term, then you're likely to see capital gains. It's buying for the short term gain that can be a bit riskier. While the market historically continues to see prices rises, it can fluctuate year to year. That's where you need the expertise of a buyers' agent, as our years of experience and deep understanding of the market can be the difference between you getting a golden goose and a dud.
Take, for example, the current unit market. There's some great gains going on here, but how do you make the most of it?
In a March 3 press release from the Housing Industry Association (HIA), it was noted that multi-unit dwelling approvals were striking new highs. Between January this year and December last year, the approvals for this type of construction rose by 7.9 per cent. On a yearly basis, that's a 4.9 per cent rise.
HIA Economist Geordan Murray commented on the reasons people are moving towards this in the press release: "Changing consumer preferences, demography, affordability challenges and aspects of the policy environment are all contributing to the current situation where a larger share of new homes are in the form of attached dwellings," he said.
Of course, multi-unit approvals can swing a little more wildly than detached homes, and are more prone to falter between approval and construction. However, the increases seen in recent months should be a big confidence booster to anyone looking at buying a house. Mr Murray noted that New South Wales, Queensland and Victoria traditionally account for approximately 80 per cent of all multi-unit building.
Yearning for yields
With this healthy level of construction for units, it's also worth noting that rental yields for this type of property are looking good. According to a release from CoreLogic RP Data, the gross rental yield for units in Sydney is currently 4.4 per cent, compared to 3.5 per cent for houses. While this isn't a huge difference, it's this sort of detail that can really change the setup of a property investment.
Not to denigrate detached homes: As Mr Murray noted, the strong performance of multi-unit construction does not mean that standalone homes are performing badly by any stretch. But if you're after slightly stronger positive cashflow in Sydney at the moment, you could do worse than seeking out a unit. With so much construction occurring, it's also a smart move to seek out a buyers' agent - our connections can help you secure one of these properties before they even hit the market.