Why units are the new Aussie dream homes

The Aussie Dream may be for a house with a backyard but there’s a growing case for purchasing apartments over houses.

The Aussie Dream may be for a house with a backyard but there’s a growing case for purchasing apartments over houses in many parts of Sydney.

Extensive new research shows home seekers wanting properties with faster capital gains, easier access to amenities, cheaper prices and better value for money may be better off with a unit this year.

The report by PRD Economics indicated it was an optimal time to snap up units in some areas due to a variety of market forces, including a historic imbalance between unit and house prices.

Unit prices up to five times cheaper than house prices in these areas were expected to make apartments more attractive for new buyers this year, pushing up prices.

Suburbs deemed the best choices for unit purchasers in the current climate were inner west enclaves Summer Hill, Petersham, Marrickville and Glebe, among others.

Danielle Baynes is selling her unit in Marrickville, one of the top ranked suburbs for unit buyers, and said it was easy to see why the area was getting more popular. Picture: Sam Ruttyn

The suburb considered the best prospect for apartment buyers was Mosman, according to the analysis of amenities, price history, local development and price differences between units and houses.

Nearby suburb Artarmon ranked the second best location for units, with the research also factoring in infrastructure improvements.

PRD economist Diaswati Mardiasmo said another key factor in determining the best unit markets was if apartment prices and sales volumes had recently started growing.

“The best suburbs for unit buyers all had substantial gaps between house and unit prices, but the unit prices were also starting to grow and sales were rising, which showed they were getting more popular,” she said.

A large gap between the price of units and houses in suburbs with a small pipeline of new apartment projects had historically correlated with “catch up growth” in unit prices, Dr Mardiasmo added.

“There reaches a point where the units in an area become incredible value compared to the houses and so units become more popular. We are seeing that now in a lot of areas where there isn’t overcrowding or overdevelopment,” she said.

“Another factor is that most people can no longer afford houses in most areas of Sydney, especially within 20km of the CBD, where you’ll typically pay $2m or more.

“Units are now the reality and we’re expecting more buyers to embrace that and start looking into how they can make unit living work for them over the long term.

“In this way, what’s happening in Sydney is consistent with other larger cities like New York, Hong Kong and London. Most people in those cities live in apartments. In Sydney, it won’t even be a choice anymore. It will be a necessity.”

Hotspotting director Terry Ryder said units were challenging the domination of houses in many suburbs, driven by affordability, rental growth, and migration.

Mosman was ranked number 1. This unit on Ourimbah Rd has a guide of $900,000.

He said older people downsizing from larger homes, first homebuyers, and investors seeking higher rental yields, were among the buyers switching to apartments.

“In inner-city precincts in our biggest cities, houses can typically cost over $2m, but apartments can be bought in the $600,000s and $700,000s in the same suburbs in many cases,” he said.

“Now, we are seeing rental growth in apartments outpace houses, as well as superior price growth over the past year. We have significant numbers of downsizers active in the market, as well as hundreds of thousands of overseas migrants arriving on our shores, with many of them coming from cities where apartment living is the norm.”

Marrickville unit owner Danielle Baynes, who is listing her two-apartment on George St for sale, said it wasn’t a surprise to see her suburb on the list of best buys given how rapidly it changed over recent years.

“It just keeps getting better,” she said. “The eating options are second to none. You’ve got a bit of everything, there’s lots of transport options. And you’re among all these charming older houses. It has a lot of character.”

PRD economist Dr Diaswati ‘Asti’ Mardiasmo.

Her agent Michael White of Adrian William Real Estate said there had been a recent uplift in demand for units in Marrickville and surrounding suburbs in the inner west.

“The most popular homes are usually in boutique blocks. Most buyers want a larger apartment in a smaller, sometimes older, block, where there are lower fees and the build quality has been tried and tested.”

Ray White chief economist Nerida Conisbee said unit buyers should keep in mind that freestanding houses historically increased in value faster than apartments due to the larger land component.

“It’s the land that rises in value,” she said. “There will of course be suburbs where units have more room for growth. If you look at the Sydney unit market, there is a lot of variability among suburbs.”

She advised unit buyers to do their homework if purchasing new apartments off the plan given the issues recorded in some new builds. “Make sure it’s a reputable builder,” she said.