Unit prices expected to outperform houses in 2025: Top locations to consider
Unit prices are anticipated to see a more significant growth rate compared to houses in 2025, as per a recent report. The KPMG Property Market Outlook predicts that while house prices are expected to rise by 3.3 percent this year, unit prices are forecasted to increase by 4.5 percent. Furthermore, it is projected that unit buyers will witness even higher gains in 2026, with an estimated price increase of 5.5 percent.
The surge in demand for units over houses can be attributed to the overall rise in property prices, which has led to a decrease in affordability for many potential buyers. According to Dr. Brendan Rynne, the chief economist at KPMG, this trend is particularly evident in capital cities, where the soaring prices of detached houses have made them unattainable for a significant portion of the population.
Apartments and townhouses, collectively known as units, are becoming increasingly popular among various age groups. Rynne noted that historically, units were mainly purchased by younger individuals or investors as an entry point into the market. However, there has been a shift, with downsizers now actively participating in the market, leading to demand from both ends of the age spectrum.
The escalating cost of construction is also contributing to the rise in unit prices. Rynne explained that units are hitting the market at a quicker pace, reflecting the increased construction costs more promptly than housing prices, which take longer to reflect the growth in construction expenses. Additionally, the forecasted interest rate cuts in 2026 are expected to further drive up unit prices.
While the report anticipates two years of steady price growth for units, houses continue to hold an advantage in long-term price growth. This is primarily due to the fact that land value comprises a significant portion of residential property costs, with houses having a larger land component compared to units.
In terms of price performance across capital cities, units are expected to outperform houses. Projections for 2025 indicate growth ranging from 5 percent in Sydney and Perth to 3.8 percent in Darwin. Meanwhile, Adelaide, Darwin, and Hobart are cities where the disparity between house and unit growth performance is most pronounced. Canberra, with a substantial supply of new units, is forecasted to have the smallest difference in price growth between houses and units.
Looking ahead to 2026, Melbourne and Sydney are expected to lead in price growth, with Melbourne forecasted at 7.1 percent and Sydney at 6.1 percent. Overall, the trend suggests that units are poised to outpace houses in terms of price growth in the coming years, particularly in major urban centers.