It’s widely known that houses tend to cost more than apartments, but the current price difference between the two has reached record levels. This gap might also offer a glimpse into the direction the property market is heading, particularly for apartments.
Back in 2014, the difference between the median house price and median unit price was a modest $44,000, or around 9%. By 2020, that gap had grown to 14%. Fast forward to today, and the difference has exploded to 45%, or $285,000. This dramatic shift was largely driven by record-low interest rates that increased borrowing capacity and saw many buyers opting for houses on larger blocks, pushing demand—and prices—for houses across Australia to unprecedented levels.
In the aftermath of the pandemic, supply chain disruptions and rising interest rates have caused construction costs to skyrocket. As a result, new housing development approvals have plummeted. While construction costs are high across the board, they tend to be even higher for apartments due to the complexity of these projects, which has led to a steeper decline in new apartment approvals compared to houses.
With house prices now reaching record levels, there are signs that the gap between house and unit prices may start to narrow. The limited supply of new, affordable apartments and the ever-rising cost of houses is likely to increase demand for units, and as demand rises, so will prices. For savvy investors, this presents a unique opportunity to capitalise on the future growth of the apartment market.
At The Property Mentors, we often hear from people who are “waiting for prices to drop.” However, the reality of the property market is that prices tend to follow an upward trajectory over time. While short-term dips may occur, they rarely outweigh the long-term capital gains that properties typically achieve.
Rather than waiting for a dramatic price drop that may never come, a smarter strategy is to look at where the market is headed. With house prices reaching the tail end of their development cycle surge, it’s likely that their growth will begin to slow, while apartments—thanks to their more affordable price point—are primed to catch up.
If you’re searching for an investment with a high potential for capital growth over the next decade, apartments might be the perfect opportunity. As affordability drives demand and the supply of new apartments remains constrained, we could see unit prices starting to reclaim some of the ground they’ve lost to houses in recent years.
At The Property Mentors, we work with developers across the country on a range of projects, including both houses and units. If you’re ready to explore the opportunities that apartments offer and take the next step in growing your portfolio, we can help. Our team is here to guide you toward the investment that best suits your long-term goals, so your portfolio can grow from strength to strength.
Don’t let the next big opportunity pass you by. If you’re considering an apartment as your next investment, The Property Mentors are here to provide expert guidance and help you make informed decisions that align with your financial goals. Contact us today to explore the possibilities.
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