Melbourne's upsizers feel the pinch as gap between unit and house prices widens
When Gianni Cardamone and his wife Joanne bought their one bedroom plus study Port Melbourne apartment for $436,000 in 2008, they thought they would easily be able to upsize to a bigger place a couple of years later.
“We thought ‘this is perfect – we’ll be fine here for a few years until we start a family’,” Mr Cardamone said.
Now they have a six year old daughter, the family has outgrown their well-positioned but tiny home. Though their unit – which they have paid off – is now worth roughly $670,000, they are still struggling to find something bigger without moving more than two or three suburbs away or taking on a large mortgage.
“Our daughter’s starting to make friends at school, she does taekwondo right next to the school, so everything is so well set up,” he said. “We’re not looking for a massive townhouse or a penthouse apartment, we’d be happy with a two bedroom apartment – but once you start looking at those places, the price jumps up a lot.”
Five to 10 years ago, they would have been able to buy that bigger apartment – even a house – without over committing financially.
But the gap between the median unit price in Melbourne’s inner ring and the median house price just a few suburbs out has exponentially widened.
In 2008, Port Melbourne’s median unit price was $475,000 – just $185,000 under the median house price a few suburbs out in St Kilda, Domain Group data shows.
In March this year, Port Melbourne’s unit price hit $660,000 – 38 per cent growth over the decade – but St Kilda’s house price grew 98 per cent over the same period to $1.31 million, putting the ability to upsize to a house in St Kilda out of reach for families like the Cardamones.
The case is similar across the city. Over the past decade, house prices in Melbourne have increased by 98.5 per cent, whereas unit prices have only moved by 49.4 per cent.
One of the reasons for the gap is that Melburnians tended to favour houses over units, Professor Robin Goodman from RMIT said.
“The other reason would be perhaps in some places there’s been an oversupply of apartments,” Professor Goodman said. “Particularly the enormous amount of high rise apartments that have just gone right into the CBD and its fringes.”
She said getting a foot in the market did not always guarantee people would have enough equity to upgrade to something bigger, because small apartments and houses on the city’s fringes did not appreciate as quickly as houses in the inner and middle suburbs.
“Both of those things are adding to this trend that we have, because of housing affordability problems, of an increasingly divided city.”
Buyers’ advocate Nicole Jacobs said a combination of low wage growth and changes in lending criteria made it harder for people to buy their second property.
“You no longer can get an 80 or 90 per cent loan, they’ve pushed them back to about 70 per cent, so you’ve got to come up with a 30 per cent deposit,” Ms Jacobs said. “There will be a lot of people struggling to get that deposit again, which they probably struggled in the first place to get for their unit or their apartment.”
For now, the Cardamones are going to sacrifice size for location, and are holding out hope the housing market will soften.
“It sounds weird to want property prices to drop when you own your own home,” Mr Cardamone said. “We’re just trying to save as much as we can – that’s the only thing we can do.”
jemimah.clegg@domain.com.au
