With Australia’s house to unit price ratio at a record high, now may be the right time to buy a unit in selected Sydney suburbs. Find out the top 18 suburbs to buy a unit.
Following the apartment construction boom from 2012, intended to fill the hole in the economy left behind by the resource’s construction boom, all three of Australia’s most populous capital cities have struggled to absorb record volumes of new units. This is especially true for the inner cities of Brisbane and Melbourne.
Sydney – where unit prices have declined
In Sydney, some markets where the supply of newly-built units, including Epping, Olympic Park, and several suburbs in the inner south and close to the Airport at Mascot, have seen unit prices decline. The new unit sector in Sydney has also seen confidence damaged somewhat by some high-profile construction defects, which has led to problems for owners.
The move away from high-density developments to regional markets
Since the beginning of the pandemic, there has been a notable shift in demand towards regional markets and away from high-density developments, pushing the price of detached housing significantly higher. However, in the most supply-constrained locations in Sydney, the market has been most robust. This is because the city has become a mature global capital city, where apartment dwelling has become normalised for professionals wanting to live near the city and the water.
House price to unit ratio. A useful predictor of price movement
In popular and more established locations, the ratio of detached house prices to units has been a useful predictor of price movements, as the ratio tends to revert over time as affordability constraints bite for the most family-appropriate housing.
Up until the first quarter of 2021, the price index for attached dwellings in Sydney remained notably below where it was in 2017.
This holds true in spite of the standard variable mortgage rate in Australia falling by around 110 basis points since July 2019.
Mortgage serviceability ratios are currently exceptionally favourable thanks to the decline in interest rates, and as such we can expect to see unit prices in the supply-constrained markets of Sydney appreciating over the coming three years, with mortgage rates expected to stay very cheap until at least 2024.
Strong areas for Sydney units
The Sydney unit markets where we expect to see strong performance include those in the eastern suburbs, in the $1 million to $1.2 million price range, such as Vaucluse and Bellevue Hill. There are also some sub $800,000 selections in the inner west, including Strathfield and Summer Hill.
To the north of the harbour bridge, there is a range of suburbs on the north shore and in the northern beaches, which look attractive from a unit to house price ratio, including Mosman, Cremorne, and other premium locations. Here, median unit prices are also in the $1 million to $1.2 million price bracket, with a high land to asset ratio available on boutique unit block purchases.
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In particular, boutique developments without shared facilities such as lifts and pools are likely to outperform due to strong demand by downsizers and well-off professionals who seek low-maintenance and very comfortable dwellings. The high land value content in these locations and unit blocks should drive capital growth over time.