The Growing Gap Between House Prices and Apartment Prices

Across Australia, and in most capital cities, the gap between house prices and unit prices has been rising, according to CoreLogic data.

In March 2023, the national median house price was $755,706 and the national median apartment price was $591,965 – a gap of 21.67%.

In March 2024, the median house price had increased $833,854 and the median apartment price had increased to $640,162 – creating a larger gap of 23.23%.

During the same timeframe, the gap widened in all capital cities except Melbourne, Brisbane and Adelaide.

Why the gap has been growing

The main reason houses tend to cost more than apartments is because houses tend to sit on larger blocks of land. However, houses also tend to have more scarcity value – so, all things being equal, if a house and apartment had the same land size, the house would probably be more expensive.

Houses are also more desirable than apartments. Partly, that’s due to scarcity; but it’s also because most people (especially families) find houses more liveable than apartments.

As a result, houses not only tend to cost more than apartments – they also tend to experience stronger price growth.

For proof, check out Australian Bureau of Statistics data for prices of houses and attached dwellings (which include apartments, as well as townhouses, semi-detached homes and terrace houses) between December 2003 and December 2023. The growth in house prices exceeded the growth in attached dwelling prices in every capital city except Darwin.

So one reason the gap between house prices and apartment prices has been growing is because, historically, that’s what usually happens, given that prices tend to grow faster for houses than apartments.

However, CoreLogic research director Tim Lawless said this gap had widened at an even more accelerated rate since the pandemic.

“The house premium rose sharply through the pandemic upswing as more people sought out space and were more willing and able to live further afield in our cities. While we saw the premium contract through the early part of the rate hiking cycle as house values fell more than unit values, across the combined capitals the gap between house and unit values has since rebounded to a new record high as house values once again rise at a faster pace than units,” he said.

Where the gap is largest and smallest

Interestingly, the locations with the largest gap between median house prices and unit prices tend to be affluent suburbs, according to CoreLogic data.

Conversely, the locations with the smallest gap tend in house prices and unit prices to be affordable suburbs.

How to interpret the data

There are two key takeaways from all this data.

First, buyers whose primary concern is affordability may want to buy either a house some distance from the city centre or an apartment closer in.

Second, investors who want to maximise their long-term returns will probably do better with houses than apartments. That said, these are just averages, which means some apartments will outperform some houses during the years ahead. Also, apartments might be better suited to your investing strategy than houses, given that they tend to deliver stronger yields.

Finally, it’s worth remembering that the property market tends to move in cycles. At some point, if the gap between houses and units becomes so large that it reaches a tipping point, a certain percentage of buyer demand will shift from relatively expensive houses to relatively cheap units – at which point, the gap will narrow.

Whether you want to buy a house or apartment, Shore Financial can help. To discuss your options, call us on 1300 416 700, email us on info@shorefinancial.com.au or fill in this online form.