{"id":2709,"date":"2022-06-01T08:11:40","date_gmt":"2022-06-01T08:11:40","guid":{"rendered":"https:\/\/royabhishek.in\/urbanbuyer\/these-are-the-types-of-properties-hit-the-hardest\/"},"modified":"2022-06-01T08:11:40","modified_gmt":"2022-06-01T08:11:40","slug":"these-are-the-types-of-properties-hit-the-hardest","status":"publish","type":"post","link":"https:\/\/royabhishek.in\/urbanbuyer\/these-are-the-types-of-properties-hit-the-hardest\/","title":{"rendered":"These are the types of properties hit the hardest"},"content":{"rendered":"

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Key takeaways<\/p>\n

Australia\u2019s pandemic property boom looks like it has come to an end.<\/p>\n

2-bedroom houses in Melbourne have fallen the most.<\/p>\n

In contrast, prices for all-size houses in Brisbane, Adelaide, Canberra, and Hobart remain robust with all reporting price increases over the same period.<\/p>\n

1-bedroom units in Perth have fallen the most.<\/p>\n

While rising investor activity could improve demand for more affordable homes, upsizing buyers remained the largest market segment.<\/p>\n

It is likely that house prices will continue to grow more than apartment prices.<\/p>\n<\/div>\n<\/div>\n

Australia\u2019s pandemic property boom<\/a><\/u> looks like it has come to an end, with new figures showing house and unit prices either stagnated or fell for the first time since the June quarter of 2020.<\/p>\n

And the price shift, amid jitters over rising interest rates, has affected some types of properties more than others.<\/p>\n

2-bedroom houses in Melbourne have fallen the most<\/span><\/h2>\n

Melbourne<\/a><\/u>\u2019s house prices dropped 0.7% last quarter to about $1.09 million, the Domain data shows<\/a><\/u><\/em>.<\/p>\n

But, the median price for smaller 2-bedroom houses fell a much more significant 10.5% over the same period to a new median of $710,000.<\/p>\n

That was sharper than the quarterly decline seen for three-bedroom (-4.5%) and four-bedroom houses (-5.7%).<\/p>\n

And it was a similar story in Sydney<\/a><\/u>.<\/p>\n

\"Sydney\"<\/p>\n

Sydney\u2019s median house price stagnated with just a 0.2% increase to $1.59 million median in the last quarter, according to Domain data<\/a><\/u><\/em>.<\/p>\n

But, the median for 2-bedroom houses fell a larger 5.2% (or $51,500) to $940,000.<\/p>\n

There was a smaller 2.7% decline recorded for 3-bedroom houses in Sydney and a 2.9% decline for 4-bedroom houses.<\/p>\n

\"01\"<\/p>\n

Interestingly, 2-bedroom houses in Sydney also saw weaker performance than larger homes in Perth and Brisbane<\/a><\/u>.<\/p>\n

Perth also experienced a 1.4% decline in prices for 2-bedroom houses, with Darwin reporting a 0.5% decline in prices for 3-bedroom houses.<\/p>\n

In contrast, prices for all-size houses in Brisbane, Adelaide, Canberra, and Hobart remain robust with all reporting price increases over the same period.<\/p>\n

1-bedroom units in Perth have fallen the most<\/span><\/h2>\n

In the unit market, Perth\u2019s 1-bedroom apartments have seen the biggest price drops with a 7.4% decline over the first quarter.<\/p>\n

The same can\u2019t be said for the remainder of Perth\u2019s unit market though – 2-bedroom units have risen 0.7% and 3-bedroom units have risen by 1.7%.<\/p>\n

\"02\"<\/p>\n

Elsewhere, unit prices in Melbourne and Sydney have fallen across the board.<\/p>\n

In Melbourne, prices for 1-bedroom units have dropped 5.9% over the first quarter, 2-bedrooms have fallen 1.7% and 3-bedroom units have stagnated with no change.<\/p>\n

And in Sydney, 1-bedroom units have dropped 1.5%, 2-bedroom units have dropped a larger 4.9% and even 3-bedroom units have fallen 3.5%.<\/p>\n

Buyers have become \u2018more selective\u2019<\/span><\/h2>\n

In a Sydney Morning Herald<\/a><\/u><\/em> article, Nicola Powell, chief of research and economics at Domain, said that buyers became \u201cmore selective\u201d in their property search during \u201csoftening markets\u201d, predicting that the forecast cooling of the housing marketing in Sydney and Melbourne will have a \u201cgreater impact on fewer premium homes\u201d.<\/p>\n

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\u201cYou see a divergence in performance depending on the types of property, quality of the property, and size of the property as well,\u201d<\/em> Powell said.<\/p>\n

\u201cBuyers become more mindful of what they\u2019re purchasing. They don\u2019t want to compromise, particularly not on space.<\/em><\/p>\n

\u201cWe know they\u2019ve really had a preference for homes with more bedrooms [during the pandemic] because they\u2019ve seen greater price growth, and we\u2019ll probably see that [preference] continue,\u201d <\/em>she said.<\/p>\n<\/blockquote>\n

\"Home<\/p>\n

Powell also pointed out that smaller homes, particularly 1-bedroom units, have a smaller buyer pool.<\/p>\n

While rising investor activity could improve demand for more affordable homes, upsizing buyers remained the largest market segment.<\/p>\n

Not only this but the recent Reserve Bank interest rate hike<\/a><\/u> for May means that home loans are now more expensive.<\/p>\n

Further interest rate hikes are expected in the near term, and at the same time as we\u2019re dealing with inflation and low wage growth – the combination is dampening Australia\u2019s red-hot housing market, particularly in the cities where prices rose the most over the pandemic-induced property boom.<\/p>\n

It makes sense then that the demand for smaller homes would be the first to fall.<\/p>\n

Remember: Cheapest isn\u2019t always best<\/span><\/h2>\n

It might be tempting for an investor or home buyer to consider buying smaller houses and units to get into the market quicker, especially while prices are cooling.<\/p>\n

But a smaller property doesn’t necessarily make good financial sense.<\/p>\n

You see, I always recommend focusing on investment-grade<\/a><\/u> properties, not just properties with the lowest prices.<\/p>\n

Because price alone isn’t enough alone to warrant a good investment opportunity<\/a><\/u>.<\/p>\n

\u2018Cheap\u2019 property will always be \u2018cheap\u2019 so don\u2019t get lured into thinking you\u2019re getting a bargain.<\/p>\n

\"03\"<\/p>\n

Moving forward, it is likely that house prices will continue to grow more than apartment prices.<\/p>\n

But with affordability becoming an increasing issue in our capital cities and the gap between the price of apartments and houses being bigger than ever, I can see more buyers moving to “family-friendly” apartments in the future.<\/p>\n

And the new Labour government’s “Help to Buy” scheme, which is capped at prices that rule out most homes in our Capital Cities may see these buyers looking at apartments.<\/p>\n

But steer clear of large medium and high rise blocks and especially stay away from off the plan apartments<\/p>\n

At the same time, well-located townhouses which have their own significant land component will make excellent investment properties and are currently in strong demand by many first home buyers who are being priced out of the housing market.<\/p>\n