Median house prices in the Vaucluse are more than five times higher than unit prices, while house prices are at least four times higher in Bellevue Hill, Mosman and Strathfield. It’s a virtually impossible gap for most to close, though Powell said few apartment owners in such areas would expect to be able to grow locally.
The smallest price gap was in Ingleburn, at just under 10 percent, or $66,000.
House prices in Riverstone, Quakers Hill, Norwest and Terrigal were also less than 30 percent above unit prices. Medians were only recorded and compared for suburbs with a minimum of 50 home and unit sales during the year through March.
Higher price gaps highlighted the extreme cost of land in domestic markets, Powell said. While land was more affordable in outlying areas, lowering the house premium, more low-density apartments and villas were also offered. These and newer units may command higher prices, reducing the price difference.
In the interior west, where the median $2.4 million home is three times the median $800,000 unit, it’s become very difficult to grow locally, BuyerX buyers’ agent Hamada Alameddine said.
Apartments had been subject to softer price growth and owners had accumulated less capital. As a result, more people were leaving the area to upgrade or opting to move to a larger apartment.
“People upgrading from a unit to a house have a hard time relying on capital growth. Unless they earn more or have the ability to borrow a lot more money, it’s tough,” Alameddine said.
While upgraders have a narrower price gap to close in more affordable markets, it’s still a sizable jump, as Norwest couple Dimple and Shamir Kuruvilla recently learned.
The couple hoped to move from their one-bedroom apartment to a house, but quickly realized their budget wasn’t enough, even though they both earned a decent salary. The median home price in the suburb stands at $1.4 million, $250,000 above the median unit price.
Ms. Kuruvilla said the houses they looked at cost more than $1.2 million and were often in need of work. Then they also had to take stamp duty into account.
“Even if they [price] the gap is smaller here, I think it’s not easy…unless you’re really making a lot of money, for people in an average job it’s very difficult,” he said.
Instead of taking on more debt than they were comfortable with, they decided to buy a new two-bedroom, two-bathroom apartment. They hope to be in a better position to upgrade in a few years.
His sales agent, Maree McCrorie of McGrath Castle Hill, had seen a small increase in people upgrading to larger units instead of houses, but noted that those apartments weren’t cheap to begin with and were more appealing to downsizers. . She expected that young Australians would increasingly stay in apartments long-term due to affordability constraints, but she noted that convenience was also a factor.
Buyers agent Pete Wargent, co-founder of BuyersBuyers, said a lack of adequate inventory, stiff competition and rapidly rising prices had made it difficult to scale up over the past two years.
Moving from a unit to a house in the suburbs used to be the hardest gap to jump, he said.
However, conditions for upsizers would improve with rising stock levels giving buyers more choice and time. He also expected the higher end of the market, which was traditionally more volatile, to see larger price declines, narrowing the price gap between homes and units.
While the borrowing power of improvement companies would be affected by rising interest rates, most size improvement companies were not borrowing to the best of their ability, he said. Rate hikes would also put downward pressure on real estate prices.