Unit prices to outperform houses in 2025, this is where you should buy

Unit prices are expected to grow at a higher rate than houses in 2025, according to a new report. 

While house prices nationally are predicted to increase by 3.3 per cent in 2025, unit prices are set to rise by 4.5 per cent, according to the KPMG Property Market Outlook.

There are expected to be even more significant gains for unit buyers in 2026, with price gains of 5.5 per cent in that year.

Buying in cheaper

"One of the key trends emerging in the housing market is unit prices are expected to outpace house prices," the KPMG Residential Property Market Outlook noted.

A big factor behind that is rising property prices overall, according to KPMG chief economist Dr Brendan Rynne.

"There does seem to be an increase in demand for units because affordability is now getting worse." Dr Rynne said.

He said that was particularly the case in capital cities, where the escalating prices of detached houses have priced out a large portion of the population.

Units for every age

Units, which cover apartments and townhouses, were also now being embraced by more people and across generations.

"Historically, it was really the younger part of the community that purchased units or investors as their entry into the market.

"Whereas now what we are finding is downsizers are now playing a much more active part in the market as well, so you're getting demand at both ends of the age spectrum," Dr Rynne said.

He said unit prices were also on the rise as the cost of construction rose.

"Units are coming onto the market a little bit more quickly, and so they are reflecting increased construction prices in a more timely manner than housing prices, which reflect the growth in construction costs."

Dr Rynne said unit prices are forecast to rise further in 2026 as interest rate cuts kick in. KPMG is factoring in three rate cuts for next year.

Cuts and costs

"The first couple of cuts are not going to reduce demand per see, but as you see more and more of these cuts towards 2025 and 2026, this is when we expect the demand side of the equation to ramp up," he said.

While price growth is predicted over the next two years for units in the report, houses will always have an advantage over units for price growth in the long term.

Dr Rynne said that with land value making up the most significant cost of residential property, houses will continue to have a leading price gap over units.

"When you look at the residential cost of a dwelling, the largest cost is the land, and by definition, a unit has a much smaller component of land than does a standalone house."

Where to buy

Across all capital cities, units are predicted to outperform houses. 

For units, the predicted increases for 2025 range from Sydney and Perth's 5 per cent growth to Darwin's 3.8 per cent. The cities with the biggest difference between house and unit growth performance were Adelaide, Darwin and Hobart. Canberra, which has a substantial supply of new units, saw the smallest difference in price growth between houses and units. 

In 2026, Melbourne at 7.1 per cent and Sydney at 6.1 per cent will see the strongest growth.

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