‘Like starting again’: Melbourne upsizers priced out of the market
The cost of upsizing from a unit to a house has left Melbourne buyers feeling like they are starting from scratch, and the widening price gap between the two is making it harder to find the space to raise a family.
Melbourne house prices have risen faster than unit prices over the past decade, with the price gap between the two reaching a record high in March last year at 86 per cent and barely easing since, data from Domain has revealed.
Buying a house in 2024 costs $467,925 – or 83 per cent – more than a unit, based on the median Melbourne house and unit price of $1.03 million and $564,095, respectively.
It’s left buyers turning to options more common among first home buyers, such as relying on help from family or taking out lenders mortgage insurance.
Domain head of research and economics Dr Nicola Powell said for many buyers, the unprecedented price gap meant it was “almost like starting again”.
“It’s pretty much the highest it’s ever been for those looking to upsize from a unit to a house...what it creates is a real barrier to deciding to upsize,” Powell said.
“It changes decisions for people in terms of when they perhaps start their family, they might push that to slightly later on in order to get themselves into that financial position to be in a house rather than a unit.”
Powell said buyers needed “stepping stones” to help them progress up the property ladder, including “more medium density housing” like townhouses and boutique apartments in Melbourne’s middle suburbs.
“If we had more terraced homes and higher density detached homes... actually that median house price will probably be lower than what it is today,” she said.
Demographer Mark McCrindle agreed that the widening gap between property types was a challenge for young families, adding that a lack of space could slow down family growth.
Unit owners are finding it hard to upsize to a house.Credit: Jason South
“It impacts the demographics nationally. People are delaying the starting of families and, indeed, those with one [child] are not going to two or three,” he said.
“It’s a profound problem, the cost of detached homes, and it has those broader societal impacts.
“Unit living is not a barrier to couples and their choice of even starting a family but is a barrier to a growing family and that’s just the reality of it when it comes to apartment living.”
Buyers agent Cate Bakos said buyers were turning to external sources to increase their borrowing capacity, with many leaning on the bank of mum and dad to help upsize their homes.
“I’m seeing a lot of people getting inheritance paid forward, or parents just getting involved in the whole thing. If [the property] has already exceeded their borrowing capacity, it is the most obvious option,” Bakos said.
Twenty-five-year-old Thomas Burke purchased a one-bedroom apartment in Docklands after moving to Melbourne from Geelong with his partner two years ago, and is now ready to upsize.
Rather than buy a larger apartment in Melbourne, the couple has decided to move back to Geelong where they can purchase a standalone home for less than the median Melbourne house price.
“Realistically, in Melbourne, it was going to be either renting somewhere or buying a bigger apartment,” the AI and data consultant said.
Thomas Burke is selling his apartment in Docklands and moving back to Geelong, where he can buy a larger property.Credit: Jason South
The couple were looking for a three-bedroom house with a backyard, but Burke said they would have had to move an hour outside the CBD to buy a property in their price range.
“We thought, well, if we’re going to be an hour out of the city, we might as well come back to Geelong and be close to family and where it’s a bit cheaper as well,” he said.
“That gap between [units and houses] is quite big and we discovered that when we were tossing up options, like, if we sell, what can we actually buy in Melbourne? And the answer was not a lot.”
GSC Finance Solutions managing broker Matt Turner said upsizing buyers were often forced to choose between the size and location of a property.
He added that house prices were being driven up faster than units because of the demand for standalone properties and increasing land value.
“If you own a unit or an apartment, there is no land value. So you’re deficient, you’re sort of technically only investing in the actual dwelling itself, so that’s why it’s becoming more difficult,” he said.
“They’re not making any more land, so that will continue to grow.”
Turner said he has seen clients turn to “outside help” to fund deposits and increase borrowing capacity, with some forced to purchase lenders mortgage insurance.
“We are having conversations with some clients now that, you don’t have the equity that you might have otherwise had if [you were selling] a detached home because you don’t have that land value,” he said.
With Tawar Razaghi