Over the last four years, the gap between house and unit prices in Australia has widened to record levels.
Historically, houses have commanded higher prices than units.
However, since the pandemic began, this disparity has grown significantly, with house prices surging by 44.2% compared to pre-pandemic levels, while units have seen a more modest increase of 21.7%.
By March 2024, four years after the pandemic’s onset, the median house price premium ballooned from 8.4% to an astonishing 32%, according to PropTrack.
In Sydney, this gap is even more pronounced, with houses costing nearly twice as much as units—a stark $710,000 difference.
Why this growing disparity?
According to PropTrack’s Senior Economist, Eleanor Creagh, the pandemic reshaped housing preferences.
“More Australians now prioritize larger living spaces and home offices over proximity to central business districts. This shift, coupled with historically low interest rates, has allowed people to take on larger mortgages, further driving up house prices”, she said.
Despite houses consistently outperforming units in 83 of 88 SA4 regions nationally, the unprecedented house price premium has boosted unit market attractiveness in 2024.
Ms Creagh said they’ve observed units showing stronger price growth early this year, up 2.00% compared to houses at 1.48%.
Cities like Melbourne and Brisbane are noteworthy, where unit price growth has outpaced that of houses over the past year.
This trend suggests a shift towards more budget-friendly housing options due to worsening affordability.
Capital city insights
In every capital city, except Canberra and Darwin, unit prices are growing faster than house prices.
Perth, a more affordable market, shows a slight lead in unit growth, and in regional Queensland, unit prices are almost doubling the pace of house growth.
Melbourne leads the capital cities, with unit prices rising nearly three times faster than house prices, emphasizing the ongoing demand for more affordable, well-located living spaces in urban centres.
According to Ms Creagh, this shift is likely fueled by several factors:
- Affordability Constraints: As homes become less affordable, more buyers are considering units.
- Population Growth and Housing Shortages: These continue to drive demand in the unit market.
- Investor and First-Home Buyer Activity: Both groups are gravitating towards units, attracted by better rental yields and more affordable prices.
She also noted that unit prices have risen faster than house prices in over 60% of suburbs within our capital cities.
For instance, in Melbourne, 75% of suburbs saw faster growth in unit prices, and in Brisbane, this figure was close to 80%.
Looking ahead
Ms Creagh highlighted that the disparity in property types presents an opportunity.
She said that as housing affordability remains a pressing issue, the medium to high-density housing sector will likely continue to attract buyers.
The benefits of this sector include access to transportation, major employment hubs, and amenities like schools, parks, and cafes.
With stable interest rates and an anticipation of a decrease in late 2024, the demand for housing, particularly units, is expected to stay robust.
“This makes it an opportune time for investors and homebuyers to consider the relative value offered in the apartment market”, she concluded.
