Property prices: It’s now much, much cheaper to buy a unit instead of a house

Posted: 2 March 2022 2:44 pm
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The gap between house prices and unit prices is the biggest it has ever been – here's how you can take advantage.

If you're thinking about buying property, but are still considering your options, the latest figures on property prices may be of some help.

A report by CoreLogic has shown that the gap between house prices and unit prices is now the biggest it has ever been.

Although both property types have seen double-digit annual price growths, house prices are now 28.3% more expensive than units, says CoreLogic Research Analyst Kaytlin Ezzy.

While buying a unit might be your best chance at getting onto the property ladder, it's not as rosy as it looks. The cost of units are still 14.3% higher than they were a year ago. But they have not seen the same levels of growth that houses have, of which prices are now 24.8% higher than a year ago.

One of the reasons behind the increasing gap in prices is down to the supply of property. There has been a shortage in advertised listings throughout COVID-19, which fuelled value growth across the board. But the drop in the number of units listed in capital cities was smaller than the drop in advertised houses.

If you're eager to get onto the property market, it may be worth looking at a unit instead of a house while the gap is so prominent. There a couple of things to think about to give you the best chance of buying the right property in the right area.

Location is key

Unsurprisingly, location is also having an impact, so if you are looking at where to buy, this is worth considering.

Areas like Canberra, Darwin, regional Victoria and regional Tasmania all recorded stronger unit growth over the 3 months to January than their respective housing markets.

Although the gap is widening as unit price growth slows, Brisbane and Adelaide are the 2 cities still seeing unit price growth.

Make sure you research the area you want to live in, so you know the best type of property to buy in what area.

Take advantage of schemes

With both house and unit prices still much more expensive than they ever have been – add to that the rising cost of inflation – it is still increasingly difficult to afford property in Australia.

It's also getting more expensive to rent property – so what are you meant to do?

Luckily, there are some schemes and incentives out there that first home buyers can take advantage of.

You can take out lenders mortgage insurance (LMI), which is woven into the cost of the loan and allows you to borrow with just a 5% deposit. This protects the lender if you cannot pay your loan.

There's also the First Home Loan Deposit Scheme, which allows you to buy your first home with as little as a 5% deposit.

If you want to build or buy a brand new home, you can also use the government's New Home Guarantee for support, while eligible single parents can access the Family Home Guarantee.

What will happen next?

Although property prices have continued to grow over the last couple of years, some economists are predicting prices could begin dropping again when the RBA makes its expected rate hike.

Low affordability and tighter lending restrictions could still see prospective buyers priced out of the market. Demand will then turn towards the more affordable medium- to low-density sector.

International tourists are also returning to Australia, which will bolster the rental demand, particularly in cities like Sydney and Melbourne which have suffered at the hands of closed borders.

This should bolster the investment market and in turn, unit prices. In fact, home loans for investors already reached a record high in January, according to the Australian Bureau of Statistics.

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