The unit market is seeing increased demand – and this is where investors are hunting

Lisa Calautti 5 May 2022

Investor demand for units across the country is making a big comeback and would-be buyers are targeting a certain pool of suburbs.

PropTrack’s last Housing Market Indicators report found the return of overseas migration, foreign students flocking back to Australian universities, and tertiary campuses resuming in-person learning have combined to spark a perfect storm.

“Demand for houses outshone units during the pandemic as people opted for more space,” PropTrack senior economist Eleanor Creagh said.

“Now that COVID-normal is underway and people are returning to our major cities, we’re seeing signs that demand for units is starting to bounce back.”

The PropTrack report revealed enquiry volumes for all property types (houses, units, and land) grew by 2.8% month-on-month in March to be 1.5% higher over the past year.

But it was the volume of unit enquiry that kept overall enquiry levels elevated, compared to the same time last year.

“Enquiry volumes for both houses and land have slipped relative to March 2021, down 4.4% and 5.1% respectively, but the volume of unit enquiry is 16.6% higher year-on-year,” Ms Creagh said.

Possible future boom suburbs identified

Woolloongabba in Brisbane’s inner-city has led the pack, with enquiry from investors for units skyrocketing by 245% year-on-year.

Caringbah in Sydney’s south saw enquiry among investors for units soar by 220% in the 12 months to March, following closely by Pakenham in the Gippsland region of Victoria, where investor unit enquiries are up 205% year-on-year.

In South Australia, investor enquiry for units was strongest in the Adelaide suburb of Plympton, up 108% year-on-year, while Phillip in Canberra led the ACT’s unit enquiry surge with a 175% increase.

Parap in the Northern Territory recorded a 194% growth in investor demand for units, while Mt Lawley in Perth’s inner-city topped the results in Western Australia.

Finally, Howrah in Tasmania saw a 128% year-on-year increase in investor enquiry for units.

Units poised for gold in Brisbane

Brisbane-based buyer’s agent Jayne Robbins of The Informed Buyer isn’t surprised by the intense interest in Woolloongabba.

Since the announcement that Brisbane will host the 2032 Olympic Games, with the Gabba to play a central role in festivities, savvy unit buyers have been busy on the ground.

The progression of works on the major Cross River Rail transport infrastructure project is also putting the area on radars.

Woolloongabba is primarily dominated by units when it comes to dwelling types.

That attracts a mix of young couples, as well as health professionals due to the close proximity to the Mater and Princess Alexandria hospitals, Ms Robbins said. 

On top of that, it’s just a stone’s throw across the Brisbane River to the CBD.

Across southeast Queensland, buyer appetite for units has been on the rise for the better part of 12 months, Ms Robbins said.

“For young homebuyers trying to get onto the property ladder, the house price growth happened so quickly that it became unaffordable to compete… it was one of the markets that really accelerated quite quickly,” she said.

“So, I think when they started to sit back and look at the value of units, they seemed a lot more affordable. And also, investors have come back in because the growth has started to happen.

“Historically, units in Brisbane have been very flat on growth, floating between -1% and 1%. Last year, we saw a 15% growth here. We were watching that going up because we had investors who I think saw the difference between house prices and unit prices.”

Caringbah creating waves in Sydney

In Caringbah, it has been locals driving growth in unit investment in the area, Raine & Horne Sans Souci director James Johnson said.

“They know it, they understand it, they know it’s a safe investment,” Mr Johnson said of Caringbah.

“I think investors know with the way that market is, this is the go-to suburb. I think it shines a bit brighter than Cronulla in terms of an investment point of view. 

“One reason is surrounding areas are overpopulated, I think, whereas Caringbah is that real blend of houses (and) townhouses – it’s got more variety. 

“So, I think when investors look at Caringbah, they are seeing it’s not overpopulated with apartments, yet it holds its value and is considered a little bit more boutique than the likes of Cronulla markets. There are more units as opposed to houses.”

While Caringbah has seen many new builds constructed during the past 24 months, Mr Johnson said they were not the flavour of the month among investors.

“It’s the stuff that already exists – people are more interested in the older style apartments. They seem to hold their value more.

“New developments are touch and go. You do have some that go quickly, others that sit around a while. But it’s clear that anything pre-existing, or already built, flies off the shelf… the moment you list it, it’s already sold.”

Empower Wealth managing director and property investment adviser Ben Kingsley said Caringbah was becoming a favoured alternative to other suburbs in the region.

“When you start to think about what you are paying in Cronulla, Caringbah is probably going to be an attraction point for people in the whole Sutherland Shire, being on the water and also being quite mature in its development,” Mr Kingsley said.

Affordability driving unit renaissance

Across the board, it’s hardly surprising that the difference between house and unit prices is starting to see people’s interest spike in more affordable markets, he said.

“And of course, we are also seeing record low vacancy rates [so] it is no surprise that investors are starting to look at alternatives to other freestanding property in both Melbourne, Canberra, and Sydney,” he said.

“We expect that trend to continue because the yields are better at that sort of more affordable pricing. We think the more astute investor will still be looking at a classic villa, or townhouse, or small block before they start to consider large blocks.”

The broader story around affordability and how and where people choose to live is also important to note, according to Mr Kingsley.

“The thought process is: ‘Can I afford a house? No. Can I afford a townhouse? No. Can I afford a villa/unit? Maybe yes, so I will take that as an option as opposed to moving out and sacrificing lifestyle.’”

Units offered both tenants and buyers a more affordable way of living in desirable lifestyle locations.

“We are still social creatures, and we want to be in that cut and thrust and have that experience as young maturing adults where we want to basically have all those lifestyle elements. 

“And that affordability story tells us why we are moving from the choice of accommodations (and) we work down the list of what we can afford.” 

Where investors are searching for units