‘Choose old and daggy’: cheap apartments grow out of reach

Apartments at the cheapest end of the property market have grown $100,000 in some capital cities over the past four years as the housing affordability challenge continues for buyers.

Brisbane resident Amity Williams, 20, was unable to afford a standalone home so she bought a townhouse instead. Picture: Lyndon Mechielsen/The Australian

Apartments are gaining popularity as ever-rising property prices stretch affordability, but even the cheapest homes are rapidly surging out of reach.

Analysis by research company PropTrack has revealed apartment sales over the year to May were almost 20 per cent higher than the same period in 2020, following a significant price boom and the fastest interest rate hiking cycle in a generation.

As units become an increasingly popular choice, prices have followed suit. But the cheapest end of the property spectrum is rising faster, with the median price of an apartment at the bottom quarter of the market rising by more than $100,000 in some capital cities over the past four years.

PropTrack senior economist Eleanor Creagh said the price gap between houses and units reached historic levels through the pandemic and hasn’t closed in the years since.

“The relative discounts that the apartment market presents is a demand driver,” she said. “We saw in 2022 that the gap did close when interest rates were rising and prices were falling, the apartment market held up better.

“That expanded again in 2023 when the home price recovery took off. We’re really at that point where both affordability constraints are going to start to become front and centre.”

In the smaller capital cities of Brisbane, Adelaide and Perth – where prices have risen in double-digit increments for consecutive years – cheap units have soared in price as supply has outweighed the demand of eager buyers.

The bottom quarter of the market has risen by $128,000 in Adelaide and $100,200 in Brisbane to surpass a median of $400,000, while Perth remains one of the most affordable markets at $355,000 despite gains of $90,000.

Buyer's agent Cate Bakos. Picture: supplied

PropTrack senior economist Eleanor Creagh. Picture: supplied

Comparatively, the country’s two largest cities have proven more stable as new stock continues to hit the market. The cheaper end of the Sydney apartment market rose $40,000, while Melbourne rose by just $10,000.

First homebuyer Amity Williams, 20, began her search in Logan, 25km south of her Brisbane rental. She’d hoped to buy a house but quickly realised a combination of prices and borrowing capacity put that out of reach so she settled for a townhouse.

“It was quite difficult to do and if I had waited two or three weeks longer, I would have been priced out of the market,” Ms Williams said. “Because, what the same property is going for now, I couldn’t borrow.”

Former president of the Real Estate Buyers Agents Association of Australia Cate Bakos said those looking to enter the market should look for apartments that are older and daggy, not smaller.

“I do find that the apartments that are older and daggy don’t have all of the services like lifts and pools, and are also typically better located,” Ms Bakos said.

“There is something to be said for going for that older stock if you want to decrease your competition to pay a bit less. Go for something that’s not so slick with its renovation and maybe doesn’t have all of the services.”

Haesley Cush. Picture: supplied

Brisbane-based Ray White Collective principal Haesley Cush said state-based changes to stamp duty assistance like in Queensland would only cause more competition and higher prices.

“Before the pandemic, it wasn’t uncommon for well-located properties for sale to have no attendees for months,” Mr Cush said. “Now they sell in a day.”