There’s growing evidence of a trend in Australia’s biggest cities of rising demand for apartments, both for reasons of affordability and reasons of lifestyle.
In the most expensive capital cities, more people are opting for apartments in suburbs where houses are too pricey, but apartments cost less than half the price of houses.
We’re seeing it in inner-city and middle-ring suburbs in Sydney, as well as Melbourne and Brisbane.
In some of these locations, typical houses may cost $2 million but mainstream apartments in the same suburbs are available in the $700,000s or $800,000s.
This trend has been particularly noticeable in Sydney in areas such as the Inner West local government area or in the Canterbury-Bankstown LGA.
We’ve just completed an analysis of prices throughout Greater Sydney, with a focus on price performance in the three months to February 2023 – before we started to see widespread evidence of prices rising again in Sydney.
Many of the major research sources such as Domain, PropTrack, SQM Research and CoreLogic recorded growth in Sydney’s median house price and median unit price in February, March and April, despite the economic disruption going on in the background, particularly the continuing increases in interest rates.
But many individual Sydney suburbs had price growth before that general city-wide trend clicked in.
In examining price data for suburbs right across Greater Sydney for the three months to February 2023, we found 60 suburbs where the median house price had decreased but the median apartment price had increased.
This supports our theory that there is growing demand for apartments in these locations.
In St Peters in the Inner West LGA, the median house price fell 1.2% to $1.5 million in the quarter under review, but the median apartment price rose 1.6% to $950,000.
In Rockdale in the Georges River LGA, the median house price fell 2.5% to $1.57 million, but the median apartment price rose 4.5% to $705,000.
Not the price differential there, with the median for apartments in Rockdale less than half that for houses in that location.
The difference is even greater in upmarket Neutral Bay, where the median house price is $3 million (after a 1.6% quarterly decrease) and the median apartment price is $1.18 million, after a 2% quarterly rise.
In Belmore in the City of Canterbury-Bankstown, the median house price is $1.39 million but the median for apartments is $550,000 – with houses falling and unit prices rising in the quarter under review.
Other suburbs which are part of this trend include Balmain, Bronte, Clovelly, Kogarah, Manly, MonaVale, Petersham, Vaucluse and Wahroonga.
There are many other examples – and it suggests, taken with other evidence we have been gathering over the past six months or so, that one of the dominant paradigms of real estate may be shifting.
That paradigm dictates that houses on land always show better growth than do attached dwellings with little land content.
We think there is evidence around Australia from the past year or two, that this may be changing.
Demand for apartments comes from a number of different cohorts in the property market, including …
- first-home buyers,
- affordable lifestyle seeker
- and down-sizers, … with the down-sizing market becoming increasingly prominent.
The full list of suburbs across Greater Sydney, where median house prices fell but median unit prices rose in the three months to February 2023 is quite extensive – and it indicates that this is a significant trend which may have longevity.
Our new Top 5 Sydney Hotspots report features five precincts which we think have good prospects for future capital growth in both the house and apartment markets.
