03.26.2024 Local News

The Widening Gap Between House And Apartment Values

The Widening Gap Between House And Apartment Values

The gap between apartment and house prices in Sydney’s eastern suburbs has never been wider.

We explore why.

The gap between apartment and house prices has never been wider. Here, in Sydney’s eastern suburbs, we’re leading the trend. We explore just what’s driving the gap between the two and what it means for you if you’re looking to buy or sell.

How big has the gap become?

Domain recently released data showing that the gap between apartments and houses tended to be widest in more affluent suburbs. In fact, the largest gap between house and apartment prices in all of Sydney was in Bellevue Hill, with Vaucluse coming in second.

All up, the eastern suburbs contributed six of the top eight suburbs for the largest gap between house and apartment values (and the only two not in our area were on the North Shore). Here’s the list of where the gap is biggest in Sydney’s east:

Suburb Median house value Median apartment value Gap
Bellevue Hill $9,170,000 $1,355,000 $7,815,000
Vaucluse $7,900,000 $1,410,000 $6,490,000
Bronte $5,800,000 $1,631,000 $4,169,000
Rose Bay $4,700,000 $1,476,500 $3,223,500
Woollahra $4,350,000 $1,232,500 $3,117,500
North Bondi $4,275,000 $1,232,000 $3,043,000

Why has the gap become so wide?

We believe there are many reasons for the growing gap between house and apartment prices in Sydney’s eastern suburbs. Here are four of the key reasons.

1. Growth at the top of the market

As we noted last year, high-end luxury properties have been outperforming the market by some distance. There simply aren’t enough prestige homes in Sydney to satisfy the demand.

This lack of available property is especially acute in the market for harbourside and harbour view homes, as well as for oceanview and beachside homes. So what we’re seeing in the widening gap between apartment and house prices is partly the result of the ‘price ceiling’ lifting on prestige and trophy homes.

2. Post-covid priority changes

With COVID forcing people to spend more time at home than ever before, many decided they needed to upgrade their living quarters—especially when it came to gaining more space. As a result, demand for houses began to outstrip demand for apartments, pushing house values to grow at a much faster rate than apartments.

Sydney’s median house value rose twice as fast as its median apartment value during the pandemic. And that trend of superior growth has continued ever since, with CoreLogic reporting that Sydney’s median house price rose 11.7% in the year to February 2024, while the median apartment value lifted 7.8%.

3. Scarcity value

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With Sydney’s population growing and more development taking place, the number of houses is becoming scarce compared with apartments. This puts a premium on actually owning a house.

This scarcity value can be seen in the changing ratio of houses to apartments across the Greater Sydney area. According to Census data, in 2001, Sydney’s housing stock comprised 63.1% separate houses, 11.3% semi-detached or townhouses and 23.9% apartments. By 2021, this had changed so that 30.7% of the housing stock was apartments, 12.8% was semi-detached, and 55.8% were separate houses.

4. Changing demographics

One final reason for the widening gap is the change in demographics – particularly along Sydney’s eastern beaches. Suburbs such as Bronte and North Bondi, which both made the list, have recently joined the ranks of Sydney’s most prestigious suburbs.

The increasing number of prestige buyers in these suburbs has further helped drive house prices upwards.

What the gap means for you if you’re buying or selling

The growing gap between house prices and apartment prices has a major effect on upsizers, downsizers and first-home buyers.

For upsizers coming out of apartments, it can make the transition into a home more expensive. In the process, it can potentially reduce the amount of stock that’s available to them, and increase the size of any mortgage they need to take out.

For downsizers, on the other hand, the gap could be good news – as the move to an apartment can free up more cash than it would have in the past.

Finally, for many first home buyers, it makes buying a house even more out of reach. The flipside, however, is that some parts of the eastern suburbs remain surprisingly affordable for apartments – especially for those buyers willing to start with a one-bedroom or small two-bedroom flat.

Want more?

If you’re interested in buying your first property in Sydney’s Eastern suburbs, get in touch.