Units are falling half as fast as houses: what that means for first home buyers

Australia's housing downturn has now stretched into a fifth consecutive monthly fall, but the newest Cotality Home Value Index for August shows houses and units are no longer moving in lockstep. Houses fell roughly twice as fast as units last month, a gap that is quietly reshaping where a realistic entry point sits for buyers who have been priced out of a house on a block.

The gap between houses and units is widening

National dwelling values fell 0.9% in August, the fifth straight monthly decline. Underneath that headline figure, houses fell approximately 1.1% over the month while units fell around 0.5%, roughly half the pace. The gap was widest in the two largest capitals: Sydney house values fell about 1.8% against a 0.4% dip for units, and Melbourne houses fell around 1.4% compared with a 0.5% fall for units.

Zoom out to the quarter and the pattern holds. Houses are down roughly 3.3% over three months, while units are down closer to 2.2%. Looked at over a full year, national unit prices are still around 3.0%higher than 12 months ago, compared with approximately 1.5% growth for houses.

Why apartments are pulling ahead

This year's run of interest rate rises has cut into how much buyers can borrow, and that reduction bites hardest at the top of the market. Higher-value houses are more sensitive to a smaller borrowing capacity because a bigger loan is needed to reach them in the first place, which is part of why house values in Sydney and Melbourne have fallen further than units in the same cities.

• Borrowing capacity: a lower approved loan amount pushes more buyers toward lower-priced stock, and units are typically the cheaper option in the same suburb.
• Location trade-off: buyers who cannot stretch to a house near work or transport are increasingly looking at well-located units instead of houses further out.
• Relative resilience: units have held their value better through this downturn, which narrows the price gap between the two property types over time.

What this means for first home buyers

None of this means a unit is automatically the right choice, and a lender will still assess your application on its own merits. But if a house in your target area has felt out of reach, this data is a reasonable prompt to check whether a unit changes that picture, particularly in areas close to jobs and public transport.

• Get a current read on your borrowing capacity before you decide between a house and a unit, since a smaller loan amount may open up more unit listings than house listings in the same suburb.
• Compare total ownership costs, not just the purchase price. A unit typically carries strata or body corporate fees that a house does not, so factor these into your budget alongside the mortgage.
• Check how a unit purchase interacts with government schemes you may be eligible for, since price caps and other conditions can differ from those that apply to houses.
• Speak with a broker or lender about how a unit purchase is assessed compared with a house, particularly around building size and title type, as some lenders apply different criteria.

Run the numbers

Rather than guessing whether a unit or a house makes more sense for your budget, these tools let you model both scenarios directly:

• Borrowing Power Calculator - see how much lenders may be willing to approve, and how that compares with current house and unit prices in your area.
• True Cost Calculator - factor in ongoing costs like strata fees so you can compare the real cost of owning a unit versus a house.
• Scheme Comparison Tool - check how eligibility and price caps for government schemes may apply differently to a unit purchase.