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Unit price growth to outpace houses as affordability issues continue to bite - featured image

Unit price growth to outpace houses as affordability issues continue to bite

key takeaways

Key takeaways

Deteriorating affordability in Australia’s housing market combined with increased stock is expected to cause price growth to moderate across the country.

And this will cause many buyers who are priced out of the market into the unit market instead.

A new report from Oxford Economics tips apartments to outperform houses this year

Australia’s housing market has reached an ‘inflection point’ with unit price growth expected to outpace that of houses over the next couple of years, according to a new report by Oxford Economics.

Deteriorating affordability in Australia’s housing market combined with increased stock is expected to cause price growth to moderate across the country.

And this will cause many buyers who are priced out of the market into the unit market instead.

Price Growth

According to the report, we can expect an overall softer pace of property price growth through 2024, of around 2.7%.

This is much less than the 8.1% national price growth recorded by CoreLogic in 2023.

However, Oxford Economics expects price growth to bounce back quickly to above 6% in 2025-2026.

And one capital city is set to outperform all the rest.

Units tipped to outpace house price growth

Overall house price growth across the combined capitals is expected to remain relatively subdued at 2.1% in 2024, but unit prices are expected to grow at a faster pace of 4.6%, the report reveals.

Unit price forecast, 2024-2026


Units are forecast to outpace houses in Sydney (6%), Brisbane (5.1%), Adelaide (3%), and Melbourne (2%).

While unit prices are expected to jump 8.5% in Perth, house prices are forecast to grow at an even faster rate.

In 2025 we can expect even more growth for Australia's unit market.

Nationally, unit prices are expected to accelerate to 7.6% growth in both FY25 and FY26, led by Perth where unit values are tipped to grow by 9.7% per annum, Sydney (8.3% p.a.), Brisbane (8.2% p.a.) and Darwin (8% p.a.).

What's driving the increases?

It’s mostly due to their affordability.

The cheaper price of units compared to houses is expected to drive the growth, given high property prices and high interest rates have combined to make buying a house further out of reach for many buyers.

After all, with significantly reduced borrowing capacities, units may become a more attractive option to buyers who have less to spend.

House price growth forecasts: How each major city stacks up

The three cities with the fastest price growth last year — Perth, Adelaide, and Brisbane — are expected to remain the strongest-performing markets in the country as we continue through 2024.

House price forecast, 2024-2026


Oxford Economics senior economist and author of the report, Maree Kilroy, added that low levels of advertised listings and affordability in pockets will also help to prop up property prices in these three cities - Perth, Adelaide, and Brisbane - in 2024.

And the clear front winner is Perth.

The report predicts that Perth’s house prices will surge by 9.3% in 2024, chiefly driven by affordability, western Australia’s strong economy, rapid population growth, low unemployment, and the national housing supply shortage.

These issues will combine to boost demand for the city at a time when construction bottlenecks push buyers towards established properties, which are also already in short supply.

Perth’s anticipated price growth means the city’s median property price would likely overtake Adelaide by 2025.

Adelaide’s property price growth is expected to slow to 1% this year after having enjoyed a bumper 2023 where prices grew almost 11% off the back of tightened affordability and limited supply.

Meanwhile, Brisbane’s property price growth is forecast to record the second-fastest house price growth behind Perth, with values expected to jump 3.9% in 2024.

“The Brisbane market continues to benefit from relative affordability compared to the southern capitals, alongside strong future employment prospects, demand fuelled by interstate and overseas migration, and a scarcity of new dwelling supply,” Kilroy said.

Elsewhere, Australia’s most expensive city, Sydney, where home prices jumped 7.72% last year, is expected to have a much slower pace of growth in 2024, of 1%.

Worsening affordability is expected to soften demand and a rise in listing volumes.

In Melbourne, property price growth is expected to sit relatively flat, with a 0.7% growth over the year as increasing supply and policy changes dampen investor demand.

“Slower growth in the upper quartile has become increasingly evident, hinting that, as affordability worsens, demand is being deflected from the more expensive price bracket to the middle of the market,” Kilroy said.

But this is expected to accelerate in 2025 and beyond.

And there is one city which is forecast to make a comeback after several years of underperformance - Darwin.

According to the report, Darwin’s house price growth will accelerate from mid-2024 onwards, jumping up to 7% in 2025 and 8.2% in 2026 as the government invests further into driving employment growth.

More than $6 billion is slated to be spent on defence projects in the Northern Territory in the next few years, creating around 7,500 new jobs.

Darwin's median house value fell 1.58% in 2023, according to the PropTrack Home Price Index, and values haven't yet recovered since the 2022 downturn.


A final note for investors…

When it comes to property investment, lower prices or predictions of out-of-the-ordinary price growth aren’t enough to warrant a good investment opportunity.

‘Cheap’ property will always be ‘cheap’ so don’t get lured into thinking you’re getting a bargain.

And likewise, you should never follow a trending, hotspot, or growth area without it meeting our other investment criteria.

Moving forward over the next decade, townhouses, villa units, and family-friendly apartments will be great investments, especially considering their current affordable entry price compared to houses.

And with soaring construction costs it is likely that all new apartment projects will cost 25%-30% more than currently completed projects and this causes the value of established apartments to rise as well.

My advice to investors is to avoid:

  • Packed high-rise apartment towers.
  • Locations right in the thick of the CBD – they’re over-supplied and have low growth drivers.
  • Highly-featured complexes with lots of shared spaces that are expensive to maintain, like lifts, pools, and gyms.

Instead, I suggest you look for larger “family-friendly” apartments and units in middle-ring suburbs, which are close to good schools, parks, and cafes.

Throw in some good public transport links, and you’ve got the ideal investment for the Australian family of the future.

About Brett Warren is National Director of Metropole Properties and uses his two decades of property investment experience to advise clients how to grow, protect and pass on their wealth through strategic property advice.

Totally, I agree with you. As an apartment developer in Brisbane, I saw how builders cost increased more than 30%~40% on total. Some items like concrete became almost double in the last 3 years. Definitely, prices will increase need to increase mor ...Read full version

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