Traditionally, units have been a more accessible entry point into the property market than standalone houses. Priced consistently lower than houses, they’ve been especially appealing to first-home buyers and investors. However, recent trends show an interesting shift, with the price gap between houses and units beginning to narrow for the first time.
A decade of growing divide
Over the past decade, on average, house prices have tended to outpace unit prices, with the price difference between houses and units being minimal in many urban areas.
But, according to Jaime Pratt, Head of PM at VPM, by early 2020, that gap had widened. “As the pandemic took hold, many buyers sought larger spaces and alternatives for home offices and family living”, she explains. “With low interest rates making borrowing easier, house prices soared significantly widening the price gap and highlighting a notable difference in costs.”
Years later, the way we live and work has changed, and so has the market. By mid-2024, the price gap between units and houses had started to shrink, indicating unit prices could be on the rise again.
A drop in unit supply
Before 2020, new unit developments were booming in many Australian cities. “This oversupply, combined with a preference for houses, helped keep prices low and ultimately more affordable”, Jaime says.
“But, more recently, rising construction costs, higher interest rates, and a shortage of skilled workers have led to fewer new units being built. This has resulted in declining new unit approvals, especially for apartment buildings.”
Escalating costs and a shift in demand
Without a doubt, the rising cost of living has also meant that the cost of building new units has increased, from development and construction to insurance. As a result, Jaime explains that many developers are turning their focus to high-end apartments aimed at wealthier buyers.
“While most existing apartments are priced under $1 million, fewer new builds remain within that price range”, she says. “In comparison, new houses, often built in more affordable outer suburbs, still remain below the $1 million mark. This leaves fewer affordable units on the market, potentially driving up the prices of existing apartments as buyers seek alternatives.”
Could units make a comeback?
With fewer affordable new units entering the market, demand for existing ones will likely rise, bringing unit prices closer to those of houses. Jaime believes that units could become more competitive if these trends continue, particularly for buyers priced out of the housing market. “The decrease in new unit developments, combined with higher costs for new projects, might push up the value of established units as more people search for convenience and urban living.”
These shifts in supply, demand, lifestyle and building costs can’t be ignored. With house prices at record highs and new developments focusing on the luxury end of the market, the unit market has a strong chance for growth. This trend is influenced by changing buyer priorities and a renewed interest in affordable, well-located units in city centres.
If you need more guidance on current market conditions and understanding these market shifts to make the most of your property investment, reach out to our qualified
