Five Best Suburbs For Unit Price Growth
Perhaps there’s a reason the saying goes ‘safe as houses’ and not ‘safe as units’.
Common consensus – as supported by historic market trends – is that detached houses benefit from greater long-term prospects, and higher growth potential than units.
But right now, there’s something happening across several Sydney suburbs that suggests units could be set for quicker growth potential, at least in the short to medium term: That’s because the price gulf between apartments and houses in these areas is the largest in recent memory.
Take Sydney’s Inner West. You will struggle to find a detached home of any kind and in any condition for under approximately $1.4 million. But, at the same time, you can still find a solid two-bedroom unit with off street parking for about $800,000.
This huge price differential is absolute madness.
Those who can’t afford to buy a detached home now are unlikely to be able to manage it in the future, as the market’s sustained growth will push prices even further out of reach for the lower end of the market.
But buyers on a budget looking for a two-bedroom property still want somewhere to live. As prices rise, they will likely turn their focus to property types they can afford in areas they want to live.
My prediction is that when the world finally recovers from COVID-19, there will be a surge of people returning to Sydney from overseas, along with those reversing their sea-change/tree-change decisions. There will be renewed demand for apartments in blue-chip areas close to the CBD and hence the price gap between houses and apartments will narrow.
This is why I am telling my investor clients that it is a good time to buy a cheaper apartment so they can get in before the rest of the market catches on.
Here are five suburbs that I believe are well worth watching – and I’ve drawn on realestate.com.au data to illustrate my point.
Marrickville
Marrickville in Sydney’s Inner West is one suburb where the recent and rapid rise in house prices will drive would-be buyers toward apartments as an alternative in the very near future.
If you look at the price trend over the past few years, the lag in unit growth is evident.
In December 2018, the median detached dwelling price was $1.3 million, whereas at the end of 2020 it had grown to $1.43 million. Comparatively, the movement in median unit prices in two years was a meagre $35,000 to $747,000 in December last year.
That’s quite a chasm between houses and units. Here’s how it looked from 2012 to now.
Source: realestate.com.au and PropTrac
Many buyers are being priced out of the detached market in Marrickville, but they are still very keen to live in the suburb. It’s trendy, there’s a lot of going on in terms of development and infrastructure changes including the new Metro. Gentrification is occurring but in a way that retains the local character and charm. Marrickville is well located and has convenient links to the city. And for hipsters who eventually settle down and have kids, there are some excellent local public schools.
Leichhardt
A short trip north of Marrickville, Leichhardt is an historically Italian enclave with a unique village feel and vibrant community. Here, something similar is taking place.
The current median house price of $1.51 million is significantly higher than the median for units at $1 million neat. It’s been quite a sharp increase for detached values too – about $160,000 in two years – in stark contrast to units, which rose just $40,000.
Source: realestate.com.au and PropTrac
But, in the three months since December, median unit prices have actually surged another $30,000, giving weight to my theory that pent up price growth in the Leichhardt apartment market is just coming to fruition. Fear of missing out combined with budgetary pressures is driving a surge in attention from would-be house buyers.
Randwick
In Randwick the gap between house prices and apartment prices is profound.
Here, the median house price of $2.55 million has resulted from pretty substantial price growth over the past two years – about $150,000 all up – while the current unit median of $945,000 has remained mostly steady. But a plethora of recent apartment sales well in excess of $1 million have me convinced the gap is starting to narrow.
Source: realestate.com.au and PropTrac
It’s not hard to appreciate the universal appeal of this suburb. The recently completed Light Rail makes it a breeze to get to. There are great local amenities. It has a nice welcoming and safe feel about it. The UNSW and TAFE campuses give the area a young and vibrant feel too.
Surry Hills
A stone’s throw from the city but still right in the thick of the action is the ever-popular Surry Hills.
It amazes me that the median unit price here isn’t above $1 million, but instead currently sits at $920,000. It has shot up a bit in the past few years, though – from $850,000 just two years ago. But it is quite a way behind the $1.8 million median for houses.
Source: realestate.com.au and PropTrac
As people make their way back to inner Sydney after COVID, Surry Hills is primed to benefit. I believe investors and young professionals will lead the charge to Surry Hills. As such, don’t expect unit prices to remain ‘sub-$1 million’ for very long.
Neutral Bay
Accessibility is also a benefit for those who live in the Lower North Shore suburb of Neutral Bay. Positioned just across the Harbour Bridge to the north, Neutral Bay boasts plenty of desirable elements, including many properties with water views.
The median house price of $2.25 million again dwarfs the median unit price of $1.03 million, and while it always has, the gap has grown in recent years.
Source: realestate.com.au and PropTrac
Houses in this part ofthe world tend to be spectacular. There is everything on the spectrum from quant historic cottages that have been well-maintained through to grand mansions you could find on the cover of a magazine.
The alternative is a far more affordable two-bedroom unit. This delivers all the locational benefits of Neutral Bay without the $2-million-plus price tag, which is certain to attract buyers as COVID’s shadow fades.
