The Melbourne suburbs where homebuyers can spend the least for extra space

Homeowners keen to upgrade from an apartment to a house with land would have an easier time in some northern suburbs of Melbourne and in growth corridors than in the city’s inner east, where the gap between unit prices and house prices is widest.

Even so, some upsizing hopefuls say the COVID-era property boom and rising cost of living have driven prices out of their reach even in more attainable areas, which has prompted bargain hunters to look further out for a larger home.

An analysis of Domain data shows house and unit median prices are closest in Glenroy, where the median house costs $141,000 more than the median unit. That was followed by Carrum Downs and Pakenham.

At the other end of the scale was Toorak, which had the largest median gap of $3.95 million. That mark was followed by Malvern and Kew, some of the most expensive suburbs in Melbourne.

It costs almost twice as much to buy the median house in Melbourne than the median unit, a gap of about $475,000. Four years ago, the difference was $313,000.

Demographics Group co-founder Simon Kuestenmacher said the price ceiling in the affluent inner areas was so high it drastically inflated the difference in median prices, and was mostly due to planning restrictions and property market dynamics.

“[Houses] are not entering the market at a quick rate, and they have a large land component, so the prices are outrageously high,” he said. “That explains the gaps there. We do have unit stock coming online, so unit prices are staying low. But with houses, what’s coming on the market is higher quality stock.”

More affordable areas would have a smaller gap because of high rates of house building and a general floor under prices, Kuestenmacher said.

“In a growth area, houses are relatively cheap and unit prices can’t go that low,” he said. “There is a gap, of course, and the supply of units is not that big, but what’s coming on is not overly cheap, so there’s a small gap.”

In the northern suburb of Pascoe Vale, the difference between median prices was $195,000.

Serdar Yilmaz is moving from his Pascoe Vale townhouse to a larger home in Greenvale.Credit: Chris Hopkins

But townhouse owner Serdar Yilmaz said he had completely discounted the prospect of moving into a larger home in the area.

“It would have cost me more money to upgrade to a bigger home in Pascoe Vale,” Yilmaz said. “Prices have gone through the roof … You might hit the millions and get yourself an older home, but it will require a lot of renovation. It’s not something I’d want to move into. You’d have to spend $300,000 to do it up.

“I didn’t want to go into big debt at my age. I want to be comfortable.”

Instead, Yilmaz is moving his family out to Greenvale, about 15 kilometres north of Pascoe Vale. He said he would be able to get more house for less, and it would be closer to his teenage son’s school.

“My son is now 16 and the rooms are a bit too close to each other, and he needs a bit more space,” he said. “He’s commuting from Pascoe Vale to [Greenvale].

“If we sell in Pascoe Vale we might get the right amount to buy a bigger home in Greenvale.”

Ray White Glenroy’s Omer Koskal, who had the listing, said it was more typical for buyers in the area to try to move further out for a larger home, to ease cost-of-living pressures.

“We don’t see many people who are upgrading these days, a lot of people are trying to reduce their mortgage, of course,” he said. “Suburbs like Greenvale and Craigieburn [are popular] because they’re reducing the mortgage while finding a larger home at the same time.”

Sky-high prices in the prestige suburbs in the inner east meant upgrading buyers had a harder time finding a house that wouldn’t break the bank, Marshall White Stonnington listing agent and auctioneer Abby Innes said.

“You just don’t see the growth in apartments that you see in a house. There’s bigger land sizes and it’s a better investment,” she said. “I’d rather acquire land than an apartment for that reason.”

Innes said buyers were more likely to shop around and consider “bridesmaid suburbs” to find the right place to live when upgrading. She said there were few homes for sale this winter.

“More and more we’re seeing people coming from different areas. They tend to move around quite a bit,” she said. “They might be doing a search in Albert Park, but I can speak to a buyer and they can be enticed to come over to South Yarra.

“The people who look in Toorak are coming out a bit. Those who buy in Malvern are going to Malvern East. Glen Iris is seeing an increase in sales.”