More units than houses were bought in Sydney this year

More units than houses were purchased in Sydney this year, as borrowing costs in Australia’s highest-value city compelled buyers to think smaller.

Apartments and units reigned supreme in the Sydney market in 2024, Domain’s End of Year Wrap shows, as the most transacted category of property – as it also was in 2023.

The impact of elevated interest rates and living costs is laid bare in the report, as the nation’s cash rate held firm to end the year at a steady 4.35 per cent.

Units accounted for 45.9 percent of sales in Sydney in 2024, compared to 44.3 per cent sales struck for houses.

The stats are flipped when measured on a national level.

For the combined capital cities, 63.6 per cent of deals were for houses and 27.5 per cent were for units.

Domain’s head of research and economics Dr Nicola Powell says townhouses – somewhere between the two more common types of real estate – were underrepresented in both Sydney results and the national data.

In 2023, units also accounted for more sales than houses, Dr Powell says, but this trend is relatively recent in the scope of the market.

She says increased investment activity in Sydney has in part driven the popularity of units.

“An element that we also saw was investors selling off, too,” Dr Powell says. “It could be capturing some of the offloading that we saw.

“And what is this telling us about affordability? Sydney is a global capital city and what we should see is a diverse array of properties and higher density transacting.”

Dr Powell says townhouses account for almost one fifth of properties transacted in Perth, but only 6.6 per cent in Sydney. She described it as a “missing middle” in the market in Sydney, and on a national scale.

In Melbourne, townhouse sales were 5.7 per cent of all properties sold and in Brisbane, 3.9 per cent.

“Townhouses offer an opportunity to bridge that gap between purchasing a unit and purchasing a house,” she says. “Townhouses are very much needed in our capital cities. What the data tells me in Sydney, Melbourne and Brisbane in particular, is there is not not enough of them.”

LJ Hooker Group head of research Matthew Tiller said sellers are waiting to see what movement the Reserve Bank makes in the new year, after electing to leave the nation’s cash rate at 4.35 per cent for Christmas.

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With underlying inflation above the 2 to 3 per cent target range, Tiller does not expect any rate cuts until May next year.

Buyers are active but vendors are adopting a watching brief.

“The next economic data is released at the end of January, and even if they were positive numbers, it doesn’t mean the RBA will cut straight away as it will want to see a period of subdued inflation, and that pushes out any rate cut,” he said in a statement.

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“The market lost momentum earlier in spring than it would normally, we saw listings rise quite sharply and have dropped off faster than expected. Some vendors are holding off until the rate cut because they think this will bring more buyers to market.

“But there are still buyers out there, transactions are happening, people are attending open homes, but there is more choice, so people are taking time to make a decision.”

Demand for property valuations have increased, potentially in preparation for rate cuts to stimulate listings.

Ben Thompson, Employment Hero CEO and the business’ chief economist, said in a statement that the December decision “to hold the cash rate underpins the fragile balance between managing inflation and supporting economic stability”.

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He said new hourly employment figures shows demand for property valuers has soared.

“While this is a symptom of tightened fiscal policy, this trend may also suggest that buyers and sellers could be preparing for a potential rate cut in the new year,” Thompson said.