For years, units have provided a more accessible entry point into the property market. Priced consistently lower than houses, they’ve been especially appealing to first-time buyers and investors. However, recent trends show an interesting shift, with the price gap between houses and units beginning to close for the first time in years.
A decade of growing divide
Over the past decade, house prices have generally outpaced those of units. Ten years ago, there was only a small price difference between houses and units in many urban areas. But by early 2020, that gap had widened. As the pandemic took hold, many buyers sought larger spaces for home offices and family living. With low-interest rates making borrowing easier, house prices soared. By this year, houses were priced significantly higher than units, with a notable difference in costs.
Recently, though, there have been signs of a change. By mid-year, the price gap had started to shrink, indicating that unit prices could be on the rise again.
A reduced supply of new units
Before 2020, many cities experienced a boom in new unit developments, which helped keep prices low. This oversupply, combined with a preference for houses, made units more affordable. Now, there is a decline in new unit approvals, especially for apartment buildings. Rising construction costs, higher interest rates, and a shortage of skilled workers have led to fewer new units being built.
Escalating costs and shift in target market
The cost of building new units has gone up, from development and construction to insurance. As a result, many developers are turning their focus to high-end apartments aimed at wealthier buyers. While most existing apartments are priced under $1 million, fewer new builds are staying within that range. In comparison, new houses—often built in more affordable outer suburbs—are still managing to stay below the $1 million mark. This shift means fewer affordable units on the market, which could drive up prices for existing apartments as buyers seek alternatives.
Outlook: Could units make a comeback?
With fewer affordable new units entering the market, demand for existing ones is likely to rise, potentially bringing unit prices closer to those of houses. If these trends continue, units could become more competitive, particularly for buyers who find themselves priced out of the house market. The decrease in new unit developments, combined with higher costs for new projects, might push up the value of established units as demand for convenient, urban living grows.
In today’s dynamic property market, these shifts are worth paying attention to. With house prices at record highs and new developments focusing on the luxury end of the market, there’s a strong chance for growth in the unit market. This trend could point to changing buyer priorities and a renewed interest in affordable, well-located units in city centres.
If you’re looking for guidance on how to navigate these market shifts and make the most of your investment, reach out today. With my expertise and up-to-date knowledge of current market conditions, I can help you find the best opportunities and achieve your real estate goals.
The post Units gaining ground on houses first appeared on New Vision Real Estate.
