Skyrocketing prices force huge homebuying change

As home prices show no sign of going down, homebuyers are being forced to dramatically change what they want in a property.

No matter the overall direction in prices this year, apartments will likely outperform houses because of the heightened price differential.

Buyers seeking cheaper housing options make sense, especially after the RBA’s 13 rate rises since May 2022.

The current median for Sydney apartments sits at $801,000, which is $567,000 or 70 per cent lower than the $1.368m house median, according to PropTrack.

The $156,000 difference across the rest of NSW is not as marked.

The current median for regional houses is $749,000 and apartments is $593,000, so the differentiation is just 26 per cent.

House and unit price growth started to diverge from historic trends during the pandemic, in part because of the heightened competition among buyers amid the shift to work from home. It was driven by the desire for houses with more room especially for a home office and a bigger outdoor space.

Units will likely outperform houses in terms of price growth this year.

Regional NSW prices benefited from these shifts, as city dwellers moved away to take advantage of more affordable, larger homes.

The exodus from the inner cities was accompanied by a decline in investor apartment buyer interest given international student tenants were prevented from taking up studies in Australia.

It was a national trend as in 2021 the national median house price was $570,000, just 9.6 per cent higher than the $520,000 median unit price.

There is now a 30 per cent gap across the nation with the gap steeper at 41 per cent in the capital cities. However the widened price gap has begun to reverse.

There was a forecast this week that detached homes in the NSW capital will rise 3.3 per cent this current financial year, as against 5.2 per cent for apartments.

The Oxford Economics Australia senior economist, Maree Kilroy, went on to forecast this trend would continue for several years.

Sydney’s median apartment price is tipped by Oxford Economics to increase 8.3 per cent over the two years to June 2026 compared to Sydney’s house median by 5.9 per cent.

Continued low supply of new apartments could see prices rise and the gap tighten even further especially given high levels of migrants who have been encouraged to buy new apartments.

The price recalibration will be welcome news for apartment owners who are looking to upgrade their home to a house. But not necessarily helpful for downsizers seeking to shift from houses to apartments.

The emerging pricier apartment trend is not just a reflection of affordability.

Developers have recently been constructing more owner-occupier apartment stock, with way more pricier three- and four-bedroom apartments in the mix.

Making apartments bigger and in more desirable locations is assisting this emerging lifestyle preference, while having an impact on the apartment median which has typically reflected the prices of cheaper, cookie cutter one- and two bedders.

Originally published as Skyrocketing prices force huge homebuying change