Units don’t always see less price growth than houses

The primary reason being that house price growth always exceeds unit price growth over the long term. While this is often the case, it doesn’t always hold true. For example, an apartment in one suburb may outperform a house in another. Less common however is unit price growth within a suburb outperforming houses in the same suburb.

Over the past 12 months, unit price growth in Brisbane and Adelaide have exceeded house price growth. Part of the reason for this is a combination of underbuilding and population growth. Whereas Sydney and Melbourne went into the pandemic with a strong pipeline of new development, this wasn’t the case elsewhere. Brisbane specifically has seen very strong population growth since then. Adelaide has also seen similar growth.

The result in regional South Australia is also interesting. Units include anything that isn’t a freestanding house. Both townhouses and apartments have done well in regional South Australia off the back of strong economic conditions. Over the past two years, South Australia has been the strongest growth state – agriculture has been a strong performer but also the state’s mining sector has done well, in particular copper mining.

In total, there were 294 suburbs where unit price growth exceeded house price growth. Sydney, Brisbane and Melbourne dominate, partly because they are the biggest cities. However, it is also likely that a larger number of high quality apartments being developed is lifting the median.

The suburbs with the biggest gaps in house and unit price growth are relatively diverse geographically and relatively expensive. The impact of the development of better quality apartments becomes more apparent at this level. Ivanhoe, for example, in Melbourne’s north-east is an expensive suburb that has seen a lot of new apartments built over recent years. The apartments being built are bigger and higher quality than the older style apartments that existed.

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