Gap Between Apartments And Houses Widens Further

July 1st, 2022 - by Brad Gillespie

Over 2021, Sydney experienced an incredible property boom.

However, not all property types shared equally in the price gains. Domain data shows that, while the median Sydney house price lifted 33.1%, the median apartment price rose by 8.3%.

As a result, the gap between the median home value ($1,403,964) and the median apartment value ($829,598) is now wider than it has ever been. We explore what this means if you’re looking to buy, sell, rent or invest in Sydney’s inner city and inner west.

Why the gap got bigger

When a city’s property market rises or falls, it rarely acts in unison. There are usually differences between both suburbs and property types. This stems from the fact that property booms can be the result of different influences.

2021’s boom was the result of several factors but one of the most important ones was an acute lack of stock. There simply weren’t as many listings as there were people wanting to buy. This lack of supply was particularly noticeable in the market for family homes and it was generating a real fear of missing out (FOMO) among buyers. Many buyers were prepared to pay well above the odds, just to secure their next place to live and this kept driving prices rapidly higher.

By and large, the same lack of stock wasn’t as evident in the apartment market.

At the same time, the property market always works on the laws of supply and demand and there were some real drivers on the demand side of the equation too. In particular, a lot of people found themselves working from home during the pandemic and this meant a lot wanted more room to move. Many decided it was time to move to the suburbs; others decided to leave the city altogether.

This meant we saw a real spike in prices in middle-ring and outer suburbs, as well as in regional Australia - more so than the inner-city (although the market here was strong too).

On top of this, one of the main buyer segments in our local apartment market is investors. But low yields and closed borders meant these buyers were less active than normal.

A better time to be a first home buyer (if it’s an apartment)

While Sydney’s median house price is unattainable for many, the median unit price is likely to be more within reach. So we’re seeing more activity from first-home buyers in the apartment market. Even here in the inner city and inner west - which are traditionally more expensive than average - there are still good buys to be had in the apartment market.

Of course, with interest rates rising, first-time borrowers may not be able to afford as much as they once could. But with prices beginning to come down slightly (the median Sydney apartment price fell 1.6% in the three months to 31 May), this could be offset to some extent. There are also generous government schemes and many of the apartments within our area actually meet their thresholds. This is likely to soon include the new federal government’s planned Help to Buy Scheme.

Downsizing in the inner city and inner west

Another group of buyers that may really benefit from current conditions is downsizers. The inner west and inner city are increasingly becoming lifestyle destinations for empty nesters who have sold in the suburbs and even families looking to be closer to the action.

This group should find that they have locked in most of the gains of the property boom and can achieve a good price for their family home. This means they will have greater spending power when it comes to securing their apartment, and could even find themselves in a strong financial position that sets them up for the next period in their lives.

Upsizing in the inner city and inner west

Unfortunately, it’s upsizers who have the most difficult task today - especially those selling an apartment and looking to move into a family home. It’s these buyers who are likely to find they have to borrow more to take the next step on their property journey. However, the recent slowing of the market may make it easier to find a home that suits and help them negotiate a better deal than they would have been able to six months ago.

For those looking to upsize, presentation, marketing and engaging a good agent to sell their existing home has never been more important.

Most affordable suburbs in Sydney’s inner west and inner city

For those looking to buy an apartment in Sydney’s inner city and inner west, there are several suburbs that remain relatively affordable for apartments.

Suburb Median one-bedroom apartment price Median two-bedroom apartment price
Marrickville $628,000 $877,500
Chippendale $660,000 $1,085,000
Newtown $665,000 $1,090,000
Waterloo $670,000 $945,000
Alexandria $670,000 $1,007,500
Erskineville $695,000 $1,026,000
Redfern $702,000 $1,080,000

Want more?

Contact our team today to find out more about how we can help you buy and sell in Sydney’s inner city and inner west.