Moving from a Sydney unit to a house gets three times harder in a generation
The price gap between a typical unit and a house in Sydney has skyrocketed in a generation to reach record levels, with a difference of $821,000.
Houses now cost twice as much as units, and experts have described the challenge of upgrading to a house akin to becoming first home buyers again due to the leap required. Some upgraders are enlisting help from the Bank of Mum and Dad.
The repercussions are far-reaching, from households living in mismatched housing to delays in family formation and birth rates falling as couples grapple with the astronomical cost of housing.
Sydney’s median house price of $1,627,625 is now more than double that of the median unit price, which sits at $806,137. The price gap reached a record $821,488 in the three months to March 2024, on Domain data.
The gap has more than doubled since the pandemic hit, as house prices were 54 per cent more expensive, or $405,037, in the three months to March 2020. Now, the gap is three times as wide as it was in the late 1990s, when it hovered at about 30 per cent.
More than half a dozen regions, largely in inner- and middle-ring suburbs, have a price gap of $1 million or more, including the eastern suburbs, the north shore and the inner west. Even in more affordable areas for units such as Ryde, households would need to bridge an eye-watering $1,632,500 gap to upgrade to a typical house.
Domain chief of research and economics Dr Nicola Powell said the gap had begun to widen at the onset of the pandemic, when houses were about 40 per cent more expensive on average historically.
“It saw a vast acceleration between the price of property types. We saw this initially occur during the pandemic,” she said. “That’s because we saw a flight to space because we were adjusting to working remotely.”
Powell said the gap could narrow if unit prices increased, which was unlikely, or house price growth slowed.
She said the more likely, and better scenario, would be extra housing variety added to the mix, including townhouses and semi-detached houses such as duplexes.
“That may re-jig the balance between the price of a house and unit in Sydney,” Powell said. “If you add more townhouses and terraced homes, it will bring down or contain the median house price.”
Demographer Mark McCrindle said the growing and record gap between property types was a massive challenge for young families who need more space, and he noted the need for greater housing diversity to accommodate growing families and various stages of households.
“It’s a massive challenge, and of course it comes at a time when those growing families are at a peak expensive period,” McCrindle said. “That’s when, as they get to the childcare age, they look to get into the detached home … it is like buying once more, being a first home buyer once again, because that gap is so big.”
McCrindle said the record price gap affects households on an individual level, with delays to starting a family, as well as the community more broadly as birth rates plunge to record lows.
“It’s a profound problem the cost of detached homes ... that’s what slows down the family growth.”
demographer, Mark McCrindle
“It impacts the demographics nationally,” he said. “People are delaying starting families, and indeed those with one are not going to two or three [children].
“It’s a profound problem – the cost of detached homes – and it has those broader societal impacts. With the prices the way they are, that’s what slows down the family growth.”
It was almost a two-year search before Rishi Bhalodia and his wife, Jay Chaggar-Bhalodia, landed on the recent purchase of their townhouse. Even then, they consider it sheer luck.
“That’s the only one we found in the area,” the 35-year-old business analyst said. “We had a budget of $1.5 million. The townhouse came up and it was perfect.”
Rishi Bhalodia with his wife, Jay Chaggar-Bhalodia, and their two sons, five-year-old Eli Chaggar-Bhalodia and seven-month-old Noa Chaggar-Bhalodia.Credit: Nick Moir
He said it cost a little bit more than the same number of bedrooms in a unit but well below what houses cost – at $2 million or more – in the Hills District. The price gap in Baulkham Hills and the Hawkesbury region between houses and units is $1,028,350.
“If you’re happy to shrink on the size of a house, I think it’s a perfect happy medium, and it’s a good way to get on the ladder. If you can find something in between, then the townhouse is your best way around it.”
Equilibria Finance managing director and broker Anthony Landahl said upgraders were resorting to a number of tactics to make the leap to a house.
“[People are tapping] help from the Bank of Mum and Dad, looking at different regions within or outside of Sydney, or they’re looking at a townhouse which offers a bit more space but may not be their ultimate long-term home,” Landahl said.
He said it had become a big challenge for families hoping to upgrade within the same suburb because of the sheer difference in values between the two property types.