Weekly Economic Update

This week, I take a look at the best way to get into our most expensive suburbs for the cheapest price.

Want to live in a prestigious suburb but can’t afford a house? These are the suburbs where the gap between apartment and house prices are greatest.

Want to buy a home in Mosman in Sydney for $1 million? Or perhaps Hawthorn in Melbourne for $600,000. No, you don’t need a time machine. You simply need to look at buying an apartment instead of a house.

Being a first home buyer is tough and has become more difficult given the extreme rates of house price growth we have seen since the start of the pandemic. Buying an apartment is almost always a lot cheaper although it does depend on where you buy. In Sydney now, units are on average around $580,000 cheaper than a house, which explains why apartments are a much more popular option for first home buyers in this city compared to elsewhere. In regional Queensland, you won’t save as much with the gap only $36,500.

At a suburb level, it is possible to buy into our most expensive suburbs on a first home buyer budget, provided you are willing to sacrifice space to get into your suburb of choice. In Sydney, $1 million is not an uncommon budget for a first home buyer and would get you into an apartment in Mosman or Killara. In Melbourne, for less than $700,000 you could buy in Hawthorn or Armadale. In Brisbane’s New Farm, you could buy an apartment at a third of the cost of a house.

A common reason that many first home buyers decide to not buy a unit is the perception that house prices always increase more than unit prices. While this is generally true within a suburb, it comes unstuck when you compare across suburbs. Unit prices in Bellevue Hill increased by 10 per cent in 2021 to reach a $1.35 million median. Compare that to a house in Baulkham Hills which started at the same price in 2020 but only saw an increase of half that. Buying an apartment can give you better price growth than a house, provided you buy in the right suburb.