Blue chip bargains: The cheaper way to buy into premium suburbs
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Photo by Scott Webb
In a surprising revelation for potential homebuyers, new analysis from PropTrack has highlighted a more affordable pathway into some of Australia’s most prestigious suburbs. Despite the seemingly prohibitive multimillion-dollar median house prices, there are significant savings to be found for those willing to consider units over traditional houses.
The data showcases that even in the nation’s most expensive suburbs, such as Toorak in Melbourne and Strathfield in Sydney, units are selling at a fraction of the cost of houses. This trend offers a lifeline to buyers eager to reside in these coveted areas without the hefty price tag associated with standalone homes.
Angus Moore, REA Group’s executive manager of economics, explained the stark contrast in pricing between houses and units in these areas. “In suburbs such as Toorak, detached houses are going to be, for a lack of a better word, estates, and so are very, very expensive,” he said. “Units are still on the more expensive end for Melbourne, so it’s not so much that the units are cheap, but the houses are just really expensive.”
This analysis identified several suburbs where the median unit price remains under $1 million, despite houses fetching upwards of $4 million. For instance, in Toorak, the median house price stands at a staggering $4.51 million, while units average just $798,000. Similarly, Strathfield and Greenwich in Sydney boast median house prices of $4.255 million and $4.25 million, respectively, yet their unit prices are significantly lower, at $755,000 and $800,000.
The appeal of these units extends beyond just the lower purchase price. Opting for a unit can lead to a smaller mortgage, reduced repayments, and for investors, a higher rental yield. This makes units an attractive proposition for those seeking to enter the property market in these premium suburbs without overextending financially.
Moore further noted the unique market dynamics in areas like Surfers Paradise, where the housing stock is predominantly units. “Surfers Paradise is the best example of that,” he said. “The housing stock in Surfers Paradise is largely tilted to units, but the houses that are there are going to be big mansions.”
The trend is not isolated to Queensland. In Sydney’s Paddington, a suburb known for its terrace houses, apartments have become a viable entry point for budget-conscious buyers. Georgia Cleary, a real estate agent with McGrath Paddington, observed a shift in the market dynamics. “Traditionally it was investors buying them, but in the last two or three years since interest rates dramatically moved up, investors have been selling out and first-home buyers and young people are buying,” she explained.
Melbourne’s Hawthorn suburb mirrors this pattern, with investors stepping aside for first-home buyers. Luke Saville from The Agency highlighted the changing demographic of apartment buyers. “The gap between apartments and houses in Hawthorn is still extremely dramatic,” he said. “The average buyer for a house is a young family with a couple of kids going to primary school or one of the private schools in the area.”
He continued, “Buyers for apartments are very much first-home buyers between the ages of 25 and 30, typically young professionals who want to be near a train line. About 90% of apartments we’re selling are going to first-home buyers.”
The rental yield for units in these premium suburbs further underscores their investment potential. In Kensington, Sydney, the indicative unit rental yield is 4.3%, compared to just 2% for houses. This higher yield is appealing for investors who are keen to capitalise on the prestige of the area without the financial burden of a high purchase price.
Moore explained that the rental market for units is typically larger than for high-end houses. “Relative to owner occupiers, there’s far more renters in apartments,” he said. “You don’t see as much of a rental market for those ultra premium homes,” he added.
In summary, while the allure of owning a house in a blue-chip suburb may be out of reach for many, the option of purchasing a unit provides a feasible alternative for those looking to enjoy the lifestyle and prestige of these areas without the associated financial strain.