Since the COVID pandemic first struck in early 2020, the gap between Australia’s apartment and house prices has been growing.

CoreLogic data shows that, by January 2024, the median house value commanded a 30.4% premium compared with the median apartment value.

In Sydney, the gap between house prices and apartment prices has become much much higher still – reaching an incredible 68.4%. To put this in perspective, in March 2020, Sydney house apartment values commanded only 32.8% over apartments, meaning the gap between the two has more than doubled.

But why is this happening? And is the same phenomenon taking place here in Darling Point, or are we resisting this national trend? We explore.

How the pandemic changed our property priorities

One of the key reasons for house prices outpacing apartment prices over the past four years has been a change in some of the factors driving our property market.

During the pandemic, we saw many more people begin to work from home, which meant buyers often looked for properties with a home office, or at least space in which to work. Spending more time from home, also meant a lot of people wanted more space: not just for a home office but also for lifestyle reasons.

This encouraged some to move further from the city centre, and regional, lifestyle-focused areas such as Noosa, Byron and the Southern Highlands became Australia’s top performing property markets. Meanwhile, many inner city suburbs – especially the Sydney and Melbourne CBDs – were among the worst performing.

Interestingly, throughout this, Darling Point remained a strong property market with healthy growth in apartment prices from 2020 to 2022.

The growing importance of scarcity value

In the past 18 months or so, however, we’ve seen a lot of people moving closer to the city centre. This includes many who moved away from it during the pandemic, returning “home”. In theory, that should generally encourage apartment prices to grow more rapidly.

But now, I think, we’re seeing different factors at play.

The reality is that Sydney is increasingly becoming a city of apartments. Almost twice as many people here live in apartments compared to Melbourne (30.7% vs 15.5%, according to the 2021 census). In some suburbs, including ours, the ratio of apartments to houses is far higher still.

In fact, Darling Point is one of Australia’s highest-density suburbs, with 87.1% of residents living in apartments, compared with 5.9% in townhouses and terraces and 6.5% in freestanding houses.

A ratio like this often tends to make houses more valuable due to scarcity value, i.e. there are relatively far fewer of them than there are apartments.

Darling Point’s dynamics different from most of Australia’s

In Darling Point, the median apartment value has lifted 52.8% since March 2020 (the start of the pandemic), according to realestate.com.au.

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That’s almost 50% higher than the citywide rise in the median house price (39.2%), almost exactly double the rise in Sydney’s citywide median dwelling value (26.14%), and almost six times the rise in Sydney’s median apartment value over the same period (9.6%).

We believe there are three key reasons for this.

First, downsizers are overrepresented among apartment buyers in our local market. Many have recently sold the family home for much more than they would have received pre-pandemic, giving them more to spend on their move. They also often tend to pay cash, which means they are relatively immune from the interest rate rises and cost of living pressures affecting other market segments.

Second, we are also lucky to have a disproportionate number of prestige properties in our area, and the prestige market has been performing exceptionally well over the past few years. Again, this sector has different drivers from the general property market. Here, it’s the health of the economy, exchange rates and even the amount of M&A activity that tend to have more of a bearing on prices than factors such as interest rates.

Finally, there is a shortage of quality listings available for both downsizers and prestige buyers. That means, when something does come to market, it can be the subject of intense competition. This has the effect of driving prices higher too.

What about house prices?

Unfortunately, given that there are so few houses in Darling Point (there are just 119 freestanding homes in the entire suburb), we don’t have specific data on house prices.

However, this scarcity value, is driving intense competition for houses that do come to market. Over the past year we’ve seen numerous sales over $7 million, including several over $15 million, and even a suburb record of more than $60 million.

Exactly how much a house is worth in our area often depends on land size, the home itself, plus how close it is to the water and the extent to which it captures harbour views.

Looking for a house in Darling Point?

Right now, we’re offering 2 Etham Avenue, Darling Point, a five-bedroom, four-bathroom substantial family home at the very tip of the Darling Point peninsula.

Facing north, and capturing views over Sydney Harbour to Manly and the Heads, this early 1900s manor combines original features with eclectic interiors designed in collaboration with Bourkeshire Interiors. Inspections by prior appointment.

Want more?

If you’d like to know more about the Darling Point property market or if you need help buying or selling a home in 2024, get in touch.