Units continue to challenge houses as the dwelling of choice

Units continue to challenge houses as the dwelling of choice
Units continue to challenge houses as the dwelling of choice

Five years ago, 30% of new dwellings constructed were units and townhouses. Since 2009, the market-share of attached dwellings has risen steadily, reaching 39% last year.

And the latest building approval figures suggest units now comprise 43% of new dwellings.

According to research from Bankwest, demand for medium-density housing has reached the highest level on record.

The Bankwest Housing Density Report revealed that 43% of new home approvals are medium-density dwellings. This is up from the 39% national average in the previous year.

Not surprisingly, capital cities account for 87% of medium-density approvals in the past 12 months. In five cities, units and townhouses comprised more than half of total dwelling approvals – including 68% in Sydney, Canberra and Darwin, as well as 55% in Melbourne and 53% in Brisbane.

Partly this is about affordability. In Sydney, the median unit price is $221,000 less than the median house price. In Melbourne the difference is $138,000, while in Darwin it’s $165,000.

But it’s more to do with lifestyle choices. Busy lives and the value people place on their leisure time points many buyers to a life-maintenance dwelling that doesn’t have gardens to weed and lawns to mow.

For those who want to be close to the inner city at a reasonable price, an apartment is the favoured option.

But buyers need to be careful. Several of our inner-city unit markets are over-supplied and it’s likely to get worse.

But buyers need to be careful. Several of our inner-city unit markets are over-supplied and it’s likely to get worse.

Melbourne already has huge vacancies (up to 10% in some near-city markets) and, according to PRDnationwide research, there are 88 large-scale unit projects under way or proposed.

Brisbane has high vacancies (6% in the CBD and approaching those levels in several inner-city suburbs) and has 69 large unit developments coming up. Perth has high vacancies as well, though the number of new projects in the pipeline is relatively small, with 13 new ones identified by PRDnationwide.

Sydney, to date, has not developed an over-supply and there are relatively few projects in the pipeline: 27 new ones under way or proposed.

It’s in Sydney that the trend towards medium-density living is most noticeable. Several of Sydney’s growth markets are apartment markets, including the inner-city areas Chippendale, Darlinghurst and Woolloomooloo - and the City of Canterbury, which includes suburbs such as Campsie, Lakemba and Roselands, where units are affordable.

Rising demand for apartments as a dwelling choice has also challenged the old paradigm that houses on land show better capital growth than units. Apartment markets are increasingly recording growth rates comparable to, and in some cases better than, houses.

But the surplus syndrome means buyers need to be choosy and do plenty of research into vacancy rates and building approval levels before committing.

Terry Ryder

Terry Ryder

Terry Ryder is the founder of hotspotting.com.au.

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