The Australian dream of owning a quarter-acre block with a detached house and backyard has become increasingly unattainable. Affordability has deteriorated nationally, with it sitting near the least affordable ever.
However, dwelling demand remains strong, primarily driven by population growth, declining household sizes, and increased first-home buyer interest due to the expanded 5% deposit scheme.
This solid demand is highlighted by the fact that national enquiries per listing for buying have nearly returned to February 2022's peak, when the RBA cash rate was 0.1%. Enquiries per listing for unit purchases have driven that growth, increasing by 19.6%. Although house purchase enquiries have decreased by 16.2% since then, they have been growing again over the past 12 months.
The growth rate divergence between enquiries per listing in houses and units has mostly been driven by a household’s ability to service a mortgage. As rates rose to dampen inflationary pressures, servicing costs increased, and price growth mostly continued, causing some buyers, particularly owner occupiers, to reassess their lifestyles.
There has been an increasing need for buyers to consider the trade-off between the type of dwelling that they want and the area that they want to live. As such, the desired interest in units, traditionally more affordable and in high amenity areas, has become more common.
Demand for houses remains on top, but units are closing in
Across most greater capital city regions, houses continue to be more popular overall, on a net enquiry per listing basis - that is, the average enquiries per listing for houses subtracted from units - buying interest in houses continues to outpace units. However, the gap is closing, particularly in our major cities.
Sydney had a net enquiry per listing in February 2022 of +26, meaning the average house listing received 26 more enquiries than a unit listing in Greater Sydney. That declined to a net rating of +10 as of January, driven by increasing interest in units.
Melbourne has experienced a similar decline, with its net enquiry per listing moving from +10 to +2. The difference is that enquiries into units are up 13% since February 2022, while houses remain 33% below the February 2022 point when the RBA’s cash rate was 0.1%. Since then, enquiries have been accelerating again, with rates at elevated levels.
In Brisbane, the net rating of +15 has declined to -1, meaning that, on average, a unit for sale in Greater Brisbane receives more enquiries than a house. This is not because houses are becoming less popular: underlying demand for houses has continued to increase recently, but interest in units has been growing even faster.
Perth is the outlier, with net enquiries remaining flat at +5 but experiencing significant growth in both house and unit enquiries, mostly due to strong mining activity supporting growing migration and wages. House key enquiries are up over 200% since February 2022, and units just under 300%.
Adelaide has moved from +12 to +4, with the enquiries for houses experiencing minimal movement and units increasing. Darwin has seen an acceleration in house enquiries, with enquiries per listing doubling. Hobart has seen a different shift in net enquiries, with a swing towards houses over units; however, it is significantly below the February 2022 high. Canberra remains well below its 2022 peak, with no considerable turning point in sight.
Mortgage serviceability is encouraging the shift towards unit purchases
The ability of a household to service a new mortgage is at a near-record low in Australia. Serviceability is a function of interest rates, dwelling prices and household income. When over 30% of a household's income is needed to service a home loan, it is considered unaffordable.
Since the low of March 2022, where 23% of a household’s income was needed to service a new loan, the proportion of income needed to service a loan has accelerated to 32.4%. When split by dwelling type, there has been a clear separation between units and houses.
While both unit and house loan serviceability have increased, the gap, as a proportion of income, has widened from an additional 4.6% of income to service a house loan over a unit in March 2022 to 7.4% in June 2025.
This could mark the inflection point for density demand in our cities. As land is fixed, the proportion of income spent on new housing loans is near the highest this century, and the gap to a unit continues to widen. Households are shifting toward units, and homeownership is becoming more vertical than quarter-acre.
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