Mind the gap!

The desire to own and live in your own home is virtually universal and Australia is particularly preoccupied with the idea.

It is no surprise, therefore, that there is talk of a housing crisis and solutions to address it are varied among a long list of experts:

• Build more dwellings

• Create more affordable housing

• Relax planning laws

• Release more land for development

• Increase infrastructure in underdeveloped areas

These are just a few suggestions, all of which have merit, but none of which are the panacea to solve an increasingly urgent situation, in particular in Sydney.

While houses have always attracted a premium over units, the recent pandemic exacerbated the yearning for more land and space as households converged and shared more time and activities under the one roof. This created an even broader divide between house and unit values. When interest rates first started to rise however, house prices fell more than those of units and this divide contracted somewhat.

Fast forward to 2024 and the gap between house and unit values has rebounded to a new record high, making units a more affordable alternative in sought-after inner-city suburbs. Investor activity has also dropped off so the competition for stock in multi-dwelling complexes has abated and left units as a more attractive option for owner-occupiers, particularly first home buyers or those on lower incomes.

With a fixed budget, most home buyers have to make a choice of whether to prioritise location or accommodation. As a general rule, the closer you go to well-serviced and well-connected areas, the higher the density of dwellings and smaller the lot sizes. With demand increasing, these lower cost, high density options are set to become more popular.

The question is, “Will the government step up and take responsibility for supply or will they leave it to developers whose only motive is to make a profit?”.