The widening price divide between houses and units is not shrinking

The gulf between the price of houses and units has never been more vast, leading to fears that it will have dramatic repercussions for our cities.

With houses in Sydney now 109 per cent more expensive than apartments and the median price of houses in Melbourne 92 per cent more than units, the widening gap shows no sign of shrinking.

SOLD - Price Withheld

55B Purcell Street, Bowral NSW 2576

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“Houses have been outperforming units, and units have been left behind in terms of price, which showcases how it’s becoming increasingly challenging for people to make that property jump from a unit into a house,” said Domain chief of research & economics Dr Nicola Powell of the figures from the latest Domain House Price Report. “Those affordability issues make it so much harder to make the next step on the property ladder.

“And I think it also shows that missing middle – the terrace houses and townhouses with lower prices than detached houses – isn’t providing any stepping stones for that great Australian dream of house ownership. We need affordable housing, otherwise, people won’t be able to live in Sydney or Melbourne and they’ll have an ageing population which isn’t good economically long term.”

SOLD - $915,000

3/13 Manion Avenue, Rose Bay NSW 2029

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With the median price of a Sydney house now $1,662,448 and $797,212 for units, many either have to buy apartments or, if they want a house, leave the city to afford one.

Emma McJury, 43, and partner James Straker, 43, are selling their one-bedroom unit in Sydney’s Rose Bay at 3/13 Manion Avenue for close to the median unit price of about $800,000 in a bid to buy a house in Bowral, where the median price is significantly lower than Sydney’s at $1.45 million.  

“We’ve been in our place for 10 years, and we love it, but we’re looking for a bit more space and a veggie garden, and we couldn’t afford a house in Sydney for that,” said McJury, who works in advertising. “It would be lovely to buy a house in Rose Bay, but it’s just unaffordable, particularly with interest rates so high.

“Buying further out you can take advantage of the price difference. It’ll take a few more sacrifices and we’ll have to rein in our spending, but we wanted a bit of a different lifestyle.”

The agent selling their apartment, Samuel O’Reilly of Ray White Eastern Beaches, said many buyers are now looking for houses beyond the city. “That’s especially if their job allows them to work remotely or only come into the office a couple of days a week,” he said.

It’s a similar story in Melbourne, where the median house price is $1,068,805 and the unit median is $555,461.

Design team leader Christian Newski, 38, is also selling his two-bedroom apartment at 2/15 Maude Street, Cheltenham, for $600,000 to $660,000, in the hope of buying a house or townhouse still within driving distance of his two daughters’ childcare and schools. 

SOLD - $631,000

2/15 Maude Street, Cheltenham VIC 3192

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“My wife wants us to get a house because she grew up in a house, so we’re looking at whatever we can afford with a backyard for the girls to play in,” said Newski. “But price-wise, it’s a big jump between a house and a unit.”

The flood of people being driven out of the cities, with Sydneysiders often going to the Central Coast or Wollongong and Melburnians to Geelong or the Dandenongs, is worrying, says Suburbanite property market commentator Anna Porter. 

“People are either having to compromise on location to buy a house, or they’re having to go to units,” she said. “The housing product that could bridge the gap, the townhouses and villas, just aren’t there as there’s not the land supply to build them.

“First-home buyers in particular are feeling the crunch with cash flow and the cost of living and high interest rates. On the plus side, there are opportunities to pick up units at a good price, and eventually, we’ll see unit prices start to go up with demand, and house prices fall.”

SOLD - $1,830,000

60 Northcote Street, Canterbury NSW 2193

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The national director of valuers Herron Todd White, Kevin Brogan, agrees that younger buyers are increasingly being pushed from the cities if they want to live in a house. 

“Units are much more within reach for particularly first-time buyers,” he said. “To get a house that’s affordable, you have to live further away from the city. That might work when you’re not required to attend work in the city every day of the week, but it tends to mean that units are more realistic for many.”

But agent Aris Dendrinos, the principal of Richardson & Wrench in Sydney’s Marrickville, says it’s ridiculous that people even idealise the prospect of house and land in our two biggest cities.

“You go to London, Paris, Athens and Tokyo, and everyone lives in apartments,” he said. “Apartments are the future of Sydney and Melbourne. We have to embrace apartments. 

“They offer a lot of benefits, like lifestyle in the cities, facilities, low maintenance and infrastructure. When you go too far out of the city for a house, you create problems with infrastructure, and that can be very challenging. There’s a lot of upsides with apartments.”