For as long as most Australians can remember, the property playbook has run on instinct: buy a house with land, hold it, and watch it grow. That rule held through booms, busts, and everything in between.
2026 has rewritten it.
National data from PropTrack shows units growing at 5.1% annually against 3.6% for houses as of July. In Sydney the divergence is starker: houses fell 3.3% over the June quarter while units slipped just 1.5%. A generation of buyers who never seriously considered apartment living is now doing the maths and reaching the same verdict: apartments now offer the better financial proposition.
Three forces are driving this shift: an affordability ceiling that has simply become too high for most buyers, policy reform that is redirecting investor money toward new apartments, and a supply shortfall that puts a floor under unit values. Together they point toward a structural realignment of the Sydney market, with real implications whether you are buying, selling, or investing.
The Numbers That Changed Everything
In July 2026, the national median house price sat at $989,000 against $730,000 for units. That is a $266,000 gap. In Sydney the spread is wider still: a 111% house-to-unit premium, the widest on record.
The quarterly numbers tell the story in finer detail. Sydney’s median house price fell $60,000 (3.3%) over the June quarter to land at $1,733,891. Units dropped 1.5% to $849,068. Even at the monthly scale the pattern held: PropTrack data for June showed Sydney houses down 0.8% while units rose 0.2%.
Perhaps the most telling statistic is this: over the past three months, 72 Sydney suburbs recorded unit price growth, while only 28 saw house price growth.
The Affordability Ceiling
Three RBA rate hikes in the first half of 2026 pushed the cash rate to 4.35%. Apply APRA’s mandatory 3 percentage point serviceability buffer and new borrowers are being assessed at close to 10%. Typical borrowing capacity has shrunk by roughly 7 to 8%.
The deposit mathematics are sobering. A 20% deposit on the median Sydney house runs to about $347,000. The same deposit on a median unit is roughly $170,000. Even with first-home buyer schemes offering a 5% deposit pathway, the gap in monthly repayments is substantial.
Variable rates for new owner-occupier loans are sitting at 5.93%. Long-term fixed investor rates are at 6.6%. Mortgage demand fell 14% over the year to June, with first-home buyer applications down 17.2%.
REA Group senior economist Anne Flaherty put it plainly: houses have become out of reach for a growing share of buyers, driving more to the unit market.
Policy Winds
The May 2026 Federal Budget introduced changes that will reshape investment property over the next decade. From July 2027, negative gearing will be restricted to newly built properties only. The 50% capital gains tax discount will be replaced with an indexed cost base.
NSW carries the highest investor lending share in the country at 43.4%, so the changes bite harder here than anywhere else. The practical outcome is that investor demand is being channelled toward new apartment developments and away from established houses.
At the same time, first-home buyers are getting a stronger seat at the table. They reached 29% of owner-occupier lending nationally in the March quarter, above the decade average of 27.6%. NSW stamp duty concessions and the expanded First Home Guarantee, which allows a 5% deposit with no lenders mortgage insurance, are both calibrated to unit price points.
The Supply Squeeze
There is a paradox in Sydney’s apartment market: demand is rising but supply is not keeping up. Urbis research shows that 75% of apartments approved in Metropolitan Sydney since 2020 have not broken ground. Over 82,000 dwellings sit in Western Sydney’s development pipeline, stalled by labour shortages, feasibility constraints, and infrastructure gaps.
CBRE estimates Sydney will deliver an average of 12,300 new apartments per year over 2026 to 2030. Demand is projected at 27,000 per year. That is a shortfall of roughly 14,700 annually.
The numbers on the ground confirm the pipeline problem. NSW commencements fell 29% and completions dropped 15% in the March quarter. Over the 12 months to March 2026, only 44,500 new dwellings were completed in NSW, roughly 40% below peak output.
The NSW Government has responded with a Pre-Sale Finance Guarantee and fast-track planning pathways through the Housing Delivery Authority. These measures are designed to unlock stalled projects, but construction timelines mean the supply relief will not arrive quickly.
Where the Growth Is
Not all unit markets are moving the same way. Growth is concentrated in Sydney’s outer and middle-ring suburbs, where affordability still works for buyers on ordinary incomes.
Penrith and Fairfield both recorded a $12,000 increase in unit prices over the June quarter. The Central Coast was the standout regional performer, with unit prices surging 11.9% in the year to June. The Illawarra and parts of Newcastle have also posted solid gains.
The broader pattern is consistent: affordable regions are outperforming expensive ones. Regional NSW prices sit just 0.3% below their peak, while capital city prices are down 2.5%. PropTrack data shows that 82% of Australia’s SA4 regions still have prices higher year-on-year, confirming the breadth of regional resilience. Domain’s chief residential economist Dr Nicola Powell has characterised this as a ripple effect: price falls begin in premium locations and spread outward, but the outer suburbs tend to stay firmer for longer.
The Investor Equation
For investors running the numbers, the yield comparison is hard to ignore. Sydney unit yields in investment suburbs range from 4.8% to 5.6%. House yields sit at 2.8% to 3.6%. That is close to double the cash flow for a lower entry price.
The rental market supports the income case. Sydney unit rents reached $780 per week in the June quarter, up 4.0%. Sydney house rents sit at $850 per week, up 6.3% over the same period. While house rents are still higher in absolute terms, the gap is narrowing (houses rose faster), and the yield advantage for units remains compelling. Vacancy sits at 1.7%, well below the decade average. Nationally, vacancy is just 1.5%.
Then there is the policy overlay. With negative gearing being restricted to new builds from July 2027, purchasing a new apartment becomes the only path to negative gearing benefits. That is a nudge that will grow more forceful as the deadline approaches.
What the Forecasts Say
The major forecasters all tell a similar story: units will hold their ground better than houses through the remainder of this cycle.
Domain’s FY2027 forecast has Sydney houses falling 5% against units down just 1%. KPMG sees houses declining 4.4% in 2026 with units broadly flat. NAB forecasts a steeper fall of around 7% for Sydney houses over 2026. Domain also projects Brisbane will overtake Sydney as Australia’s most expensive unit market in FY27, as Sydney’s unit values ease while Brisbane continues to grow.
None of these forecasts calls for a unit boom. What they describe is resilience: apartments outperforming houses on the downside, supported by chronic undersupply, rental demand, and an affordability floor.
A Market That Has Changed
The apartment market in 2026 is in a different position to the one most buyers remember. Apartments have become the more resilient asset class for a broader pool of buyers than at any time in recent memory. The case rests on three pillars: affordability that keeps units within reach, supply constraints that support values, and yields that make the investment maths work.
For buyers who would once have stretched for a house on a block, a well-chosen apartment in a supply-constrained suburb, close to transport and amenities, now looks less like a compromise and more like a sensible long-term position. And for investors, the direction of policy and rental demand points squarely toward units.
Frequently Asked Questions
How much cheaper is a unit than a house in Sydney in 2026?
As of the June quarter 2026, Sydney’s median unit price is $849,068 compared to $1,733,891 for houses, a gap of $884,823. Nationally, the median gap is $266,000 (units $730,000 vs houses $989,000). A Sydney buyer needs roughly half the deposit for a unit versus a house, making apartments the more accessible entry point.
Why are apartments outperforming houses for price growth in 2026?
Three forces are driving the shift: affordability ceilings (three RBA rate hikes have cut borrowing capacity by roughly 7 to 8%, pushing buyers to lower price points), policy changes (the May 2026 Budget restricting negative gearing to new builds and reforming CGT), and a chronic apartment supply shortage that creates a floor under unit prices. REA Group economist Anne Flaherty summarised it: houses have become out of reach for a growing share of buyers, driving more to the unit market.
Which Sydney suburbs have the strongest unit price growth right now?
Over the past three months, 72 Sydney suburbs recorded unit price growth compared to only 28 for houses. Growth is concentrated in outer and middle-ring suburbs where affordability is strongest. Penrith and Fairfield both saw unit prices rise $12,000 over the June quarter. The Central Coast has been the standout regional performer with unit prices up 11.9% in the year to June.
What is the rental yield on a Sydney apartment compared to a house?
Sydney unit yields range from 4.8% to 5.6% in investment suburbs, roughly double the 2.8% to 3.6% yields on houses. With Sydney unit rents at $780 per week and house rents at $850 per week, and national vacancy rates at a tight 1.5%, the income case for apartments is materially stronger than for houses, especially given the lower entry price.
How do the new negative gearing rules affect apartment buyers?
From July 2027, negative gearing will be restricted to newly built properties only. Anyone buying an established apartment or house after that date cannot claim negative gearing benefits. Only buyers of new-build apartments and homes will have access. Combined with the replacement of the 50% CGT discount with an indexed cost base, the policy channels investor demand toward new apartment developments. NSW has the country’s highest investor lending share at 43.4%, so the impact is especially significant here.
How much deposit do I need to buy an apartment in Sydney in 2026?
A 20% deposit on Sydney’s $849,068 median unit is approximately $170,000, roughly half the ~$347,000 needed for a median house. First-home buyers can access the expanded First Home Guarantee, which allows a 5% deposit (~$42,500 for a median unit) with no lenders mortgage insurance. First-home buyers reached 29% of owner-occupier lending nationally in the March quarter, above the decade average.
Is now a good time to buy an apartment in Sydney?
Forecasters broadly agree units will hold value better than houses through the current cycle. Domain’s FY2027 forecast has Sydney houses falling 5% vs units down just 1%. KPMG sees houses down 4.4% in 2026 with units broadly flat. With a structural supply shortfall of roughly 14,700 apartments per year, tight rental markets supporting yields near 5%, and policy redirecting investor demand toward new units, apartments have favourable fundamentals.
How many new apartments are being built in Sydney?
Sydney’s apartment delivery is projected to average 12,300 per year over 2026 to 2030, well short of the estimated 27,000 per year needed. Approximately 75% of apartments approved in Metropolitan Sydney since 2020 have not broken ground, and over 82,000 dwellings are sitting unbuilt in Western Sydney’s development pipeline. The NSW Government’s Pre-Sale Finance Guarantee and Housing Delivery Authority reforms aim to unlock this stalled pipeline.
How much can I borrow for an apartment in 2026?
With the cash rate at 4.35% and APRA’s 3 percentage point serviceability buffer, new borrowers are assessed at close to 10%. Variable rates for owner-occupiers sit around 5.93%, while long-term fixed rates for investors are at 6.6%. The three rate rises in early 2026 reduced typical borrowing capacity by roughly 7 to 8%. Your actual maximum will depend on income, expenses, and deposit size. Speaking with a mortgage broker is the best way to get a personalised assessment.
What are the best areas in NSW for unit price growth outside Sydney?
The Central Coast has been the standout, with unit prices up 11.9% in the year to June. The Illawarra region and parts of Newcastle have also shown strong unit performance. More broadly, regional NSW home prices are only 0.3% below their peak, significantly outperforming capital cities (down 2.5% from peak). Affordable regional markets continue to benefit from buyers priced out of Sydney.
Will Sydney apartment prices keep rising in 2027?
Most forecasts suggest Sydney apartment prices will be broadly flat to slightly negative in FY2027. Domain predicts a 1% decline, a much milder outcome than the 5% forecast for houses. KPMG sees units holding near-flat in 2026 before resuming growth in 2027. The structural undersupply of apartments, combined with policy-driven demand for new builds and ongoing affordability constraints, provides a floor under unit prices that houses lack.
How does the first home buyer scheme work for apartments in NSW?
The Federal Government’s expanded First Home Guarantee allows eligible first-home buyers to purchase with a 5% deposit and no lenders mortgage insurance. In NSW, stamp duty concessions also apply at the unit price point: the state offers full stamp duty exemption on new and existing homes up to $800,000 and concessions up to $1,000,000, which covers many Sydney apartments. Combined, these schemes lower the upfront cost barrier for buyers entering the apartment market.