Budget-conscious buyers are snapping up apartments

Across the country there is generally a wide gap between the price of house and a unit, a factor that is likely to become increasingly attractive to first-home buyers and other budget-conscious property buyers.

Housing affordability remains a topical issue across most housing markets around Australia and many prospective home buyers are looking to minimise their debt by either purchasing a house in the outer fringes of the city or choosing an apartment located closer to the city. Both options have their pros and cons, however units are becoming an increasingly popular option, particularly amongst younger market segments like Gen Y's and DINKS who like to live close to where they work and play.

Across the capital cities there is a $56,000 (13.3%) difference between the median house price and median unit price. The difference is as high as $129,000 in Canberra and just over $103,000 in Sydney. Not surprisingly, these two locations are showing the highest proportion of unit sales relative to all dwelling sales at around 43% across both cities.

Across the other large capital cities (Melbourne, Brisbane, Perth and Adelaide) the price gap between the median house and unit price is much less at around 18%. In dollar value terms that still represents a sizeable price gap; generally around a $70,000 difference and slightly more than $60,000 in Adelaide.

Apart from what are typically more affordable price points, apartments offer a wide variety of other factors that are important to home buyers and investors. Apartment developments are often located closer to the city and major rental/working nodes such as universities and hospitals. These areas generally have efficient transport connections, plenty of retail facilities and social amenity; all key elements high on the list of young buyers. This style of housing also generally involves less maintenance; no mowing the lawn or trimming the hedges.

Going forward we are likely to see apartments continue to garner a larger share of the market. Twenty years ago apartments comprised only about 25% of all sales. More recently the proportion of apartment sales peaked at 36% in mid 2009. The fall away since that time (see 'Unit sales as a proportion of all sales' graph) is most likely attributable to both a slow down in investor and first home buyer purchases as well as "off the plan" sales yet to settle which do not appear in the figures.

The drivers of this popularity are likely to be varied. The more affordable price points are clearly one reason. Also, a heightened preference for living close to the city and efficient transport linkages as traffic woes worsen. Changing lifestyle preferences are another factor: more baby boomers looking to downsize from the family home into a smaller and lower maintenance dwelling, younger buyers who aren't willing to sacrifice their lifestyle to live in a detached home located a greater distance from the city and similarly, couples who are willing to raise a family in an attached or semi-attached dwelling are all relevant examples. Additionally, an increase in single person households and smaller families is likely to see demand for apartment living continue to evolve. 

Tim Lawless is research director at  RP Data.

This article originally appeard on SmartCompany.