The divide between Australia's house and unit prices reached a record high of 28.3% in January, despite double-digit annual growth for both houses and units over the past year.
House values rose 24.8% and units recorded a growth rate of 14.3% over the 12 months to January 2022 according to CoreLogic's latest figures.
CoreLogic research analyst Kaytlin Ezzy said despite house price growth traditionally outpacing unit growth, the performance gap has been 'notably higher' throughout the current upswing, partly due to COVID-related demand shocks 'disproportionately' affecting unit demand.
"The annual performance gap between houses and units began to narrow in the final three months of last year, in part due to the lifting of lockdowns and border restrictions as well as increasing affordability constraints diverting demand towards the medium to high-density sector," Ms Ezzy said.
"However, in January we saw that annual performance gap start to widen again, which could, in part, be explained by the disparity between advertised house and unit supply. Shortages in advertised listings throughout COVID has helped fuel value growth by creating a sense of urgency among buyers.
"Three of the eight capital cities now have a median house price in excess of $1 million and the gap between national house and unit values is at an all-time high."
The total advertised unit supply in January across Australia's capital cities was down 3.7% compared to the same time last year and 7.8% below the five-year average.
Capital city house listings were down 12.5% over the same period when compared to the same time last year and 32.7% below the five-year average.
Growth conditions are diversifying in individual capitals and state regions despite unit values 'underperforming'.
Particularly, Canberra, Darwin, regional Victoria and regional Tasmania all recorded 'stronger' unit growth over the past three months when compared to their respective housing markets.
Ms Essay called Darwin the exception as the total advertised unit stock in each market was more than 30% below the five-year average.
Brisbane and Adelaide housing markets 'yet to show signs of slowing down'
Adelaide and Brisbane led the pace for unit gains, recording monthly rises of 1.5% and 1.4% respectively over January.
Unlike other capital city markets where growth rates have eased, these two capital cities are "yet to show signs of a slowdown in momentum".
Hobart's unit market is a 'standout performer' over the past year as median values rose by 32.8% to $574,993.
Notably, this is a higher annual capital gain than Hobart's housing market, which saw median values rise 26.3%.
Melbourne recorded a 'modest' fall in unit values this month; Perth's monthly growth rate remained flat; Sydney's unit values increased 0.1% over January.
According to Ms Ezzy, Australia's unit market may benefit from some 'tailwinds' in 2022 despite rising inflation, the predicted cash rate hike, affordability constraints, and tighter lending conditions.
"It is likely affordability constraints will gradually pull some demand away from houses towards more affordable units and with international borders opening this month, Australia may gradually see a return to pre-COVID levels of migration," she said.
"As most migrants initially rent in Sydney or Melbourne this could help bolster rental demand in those markets hardest hit by the pandemic, which, in turn, could boost investor demand and ultimately, unit prices."
COVID still driving regional migration movement
Commonwealth Bank and Regional Australia Institute's (RAI) latest Regional Movers Index - which analyses the quarterly and annual trends in people moving to Australia's regions - revealed quarterly migration away from capital cities over the past two years is averaging 15% higher than it was prior to the pandemic.
The December quarter Index showed that net migration to regional areas is more than double the levels recorded two years ago.
Commonwealth Bank's Executive General Manager for Regional and Agribusiness Banking Paul Fowler said city dwellers have embraced Australia's regions over the past two years.
"As we see flexible working arrangements continue and Australia’s domestic and international borders opening up, it’s likely we will continue to see this movement as people recognise the benefits of a regional lifestyle," Mr Fowler said.
RAI's Chief Economist and Acting CEO Dr Kim Houghton said two years of the Index shows the 'clear' impact COVID has had on people seeking a regional lifestyle.
"It is particularly exciting that many of the smaller regions showing high rates of growth are inland towns," Mr Houghton said.
"It looks like the pandemic is changing some long-established movement paths, which is a good sign for more balanced population growth across Australia in the future."
Australia's two largest capital cities - Sydney and Melbourne - saw the majority of net population outflows last year, representing 53% and 46% respectively.
NSW absorbed 50% of the net inflows to regional areas, while Queensland and Victoria saw inflows of 20% and 21% respectively.
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