This analysis looks at median unit prices across those capital city suburbs that have recorded at least 10 unit sales over the 2011 calendar year.
Across the combined capital cities, 18.1% of the suburbs have a median unit price below $300,000. The majority of capital city suburbs have a median unit price between $300,000 and $500,000 with almost 60% of all suburbs sitting within this range.
In comparison to the detached housing market, there are many more options for the price sensitive purchaser within the unit market. Although there are more options across the combined capital cities, there are no suburbs in Darwin with a median unit price below $300,000 and only around 1% of suburbs in Canberra have a median unit price below $300,000. Across every other capital city at least 10% of suburbs have a median unit price below $300,000.
The more affordable price points and ability to own closer to the city centre is a large reason why we believe that demand for inner city apartment living is increasing.
Within a 10km radius of each city centre the opportunities to purchase units below $500,000 are much more abundant than they are to purchase detached houses. Across all cities, 69% of suburbs within 10km of the city centre have a median unit price below $500,000 and each individual city has at least 20% of suburbs with a median price below $500,000.
Looking at median unit prices below $700,000, 94.6% of all suburbs are priced below $700,000 and across each capital more than 80% of suburb median unit prices fall below this level.
Across those suburbs located between 10km and 20km from the city centre, suburbs with median prices between $300,000 and $500,000 are most abundant accounting for 64.9% of all of these suburbs. When you look at all suburbs with a median unit price below $500,000 it equates to 78.3% of all suburbs within 10km and 20km of each capital city. Across each individual capital city, the proportion of suburbs priced below $500,000 in this area varies from 66.1% of suburbs in Sydney and Melbourne to all of the suburbs in Brisbane, Adelaide, Hobart and Darwin.
At a distance of more than 20km from the city centre and less than 30km from the capital city centre, 88.4% of suburbs have a median unit price below $500,000: Across each individual capital city, the vast majority of suburbs have a median unit price which sits within this range.
Once you move further than 30km away from the city centre virtually all suburbs have a median unit price below $500,000. Not only is this a reflection of the fact that the pricing differential between units and houses narrows as you move further away from the city centre but also that the supply of units typically decreases.
With housing demand strongest within inner city areas and the cost of purchasing developable land restrictive, ongoing densification makes sense.
The benefits of a greater volume of units are clear; you only have to look at the fact that in Sydney 20.5% of suburbs within 10km of the CBD have a median unit price below $500,000 compared to zero suburbs within the same boundary having a median house price below $500,000.
Units afford residents the ability to live in more desirable areas of the city than they would otherwise be able to if they had to buy a detached house. A good example of this is in Sydney; the median house price over the 12 months to December 2011 was $555,000 compared to $455,000 for units. Based on suburb median prices you could purchase a house in Riverwood (16km from the city) or you could buy a unit in Chippendale less than 3km from the city centre for $100,000 less at these median prices.
Given the strong demand to live close to the city centre, lack of appropriate infrastructure within the outer suburbs of most capital cities, the restrictive pricing for detached houses in inner city suburbs and limited supply, we anticipate that densification of the inner city will (and should) continue.