In Sydney property boom, more buyers turn to units as record prices push houses out of reach
MAY 8, 2021
Sydney buyers are increasingly turning their gaze to apartment living, as soaring prices push their dream of owning a house out of reach.
The price gap between units and houses in Sydney is at a record high, with freestanding homes in some neighbourhoods costing quadruple the median apartment price.
Greater Sydney house prices jumped more than $100,000 over the past quarter to a record-breaking median of about $1.31 million, while the unit median climbed only $16,300 to $751,000.
Houses now costs 74 per cent more than apartments, up from 55 per cent more last year.
“The jump between the two is the biggest it’s been in our history of prices, making the leap to upsizing much harder,” Domain senior research analyst Nicola Powell said.
Houses cost more than double the price of a unit across the city’s north shore, eastern suburbs, inner west, northern beaches and Ryde region.
The biggest price gaps are in affluent suburbs such as Vaucluse and Bellevue Hill, where buyers would need to quadruple their budget to look for a house over a unit, with more than $4 million separating the median house and unit prices.
Even in suburbs like Eastwood, Dulwich Hill and Dee Why, apartment buyers would need an extra $1 million to get into a median-priced house.
The steep jump is seeing house hunters increasingly turn to units, with agents across the city reporting more interest from those priced out of the market for freestanding houses, and semi-detached homes.
Buyers’ agent Hamada Alameddine, of BuyerX, said those in the competitive entry level housing market were realising they may be better off buying an apartment.
“In the lower price range [in the inner west], where it’s most competitive between $1-$1.5 million, a lot of people are probably finding better value in bigger two or three-bedroom apartments,” Mr Alameddine said.
Buyer’s agent Henny Stier, of OH Property Group on the north shore, said buyers were compromising on property types, quality and location to keep up with rapid price gains.
“House prices went up about 25 per cent since September [in my market] so it’s reached a point where people who wanted a house don’t have that choice anymore,” she said.
“I do see apartment prices going up a little, but don’t see that gap narrowing tremendously.”
Houses typically led market upswings and downturns, with steeper falls and gains, Dr Powell said, with the current housing rebound spurred on by demand for larger homes in middle and outer-ring suburbs and lifestyle locations off the back of lockdown and the rise of remote working.
But affordability constraints, and the return of investors, could see apartment prices gain momentum, Dr Powell said.
“I do think units have turned a corner and also think we’re going to see the pace of house price growth slow, so that gap between the two may have reached a peak,” she said, adding the difference between auction clearance rates for houses and units had already started to narrow.
Anita Lai, pictured with partner Graeme Hickey, is selling her Petersham apartment to upgrade to another inner west unit. Photo: Peter Rae
It’s good news for Petersham seller Anita Lai, who will take her two-bedroom unit of 11 years to auction next month, with a price guide of $800,000, to upgrade to another apartment in the inner west.
She hopes to sell and buy in the same market, but is seeing strong competition for good units in the area.
“I definitely would like to get a house one day, but, at the moment, I would like to stay closer to the city and the general inner-west area. I think, realistically, for me to stay [here I need to look at units] as houses would be out of my price range,” Ms Lai said.
Her selling agent William Pereira, of Adrian William, was increasingly seeing first-home buyers and upsizers pulling their search back to apartments, as those with a budget up to $1.3 million would be hard-pressed to find a house in the inner west.
“People used to go from an apartment to a three-bedroom house, then an apartment to a townhouse, now I’m seeing more people go from apartment to apartment, whether that’s a more modern or bigger apartment, the gap between these products now is very high,” he said.
The price gap came down to simple supply and demand, said Stephen Koukoulas, managing director of Market Economics. Houses were in shorter supply, cost more to build and had been in strong demand, with the market rebound led by owner-occupiers — many of whom were looking to upsize.
But as investors return and soaring prices put houses farther out of reach for many, demand for apartments could rise, Mr Koukoulas said.
“Price signals do work. If you can get an okay apartment for $750,000 and an okay house for $1.25 million, that’s half a million-dollar difference,” he said.
“It’s a big decision to borrow a lot of money, so people do look at relative value, and if it turns out your dream house is 60 per cent more expensive than a nice apartment, it makes sense to just buy the apartment.”
While prices could climb further, Mr Koukoulas expected the “mini-boom” to peter out of its own accord, as new housing supply continued to hit the market amid softer demand while international borders remained closed.