Nearly four in five first home buyers in NSW are now buying apartments, not houses. That single figure, from quarterly purchasing data released by a proptech firm, says more about the state of affordability than any headline price number.
The broader shift is stark. Across July to September, detached houses made up 55 per cent of NSW purchases. In the April to June quarter the share was 67 per cent. Strata dwellings took 37 per cent of buyers’ choices, and vacant land reached 7.58 per cent, a share that has now grown for two quarters running.
First-home buyers are being priced into a different product
The usual story is that buyers trade down on size when budgets tighten. This data suggests something bigger: the entry point itself is moving. A house with a backyard is no longer the default first purchase in Sydney. A unit in an established precinct is.
The western Sydney names tell the story. Parramatta, Penrith, Blacktown and Liverpool are all among the 10 most popular locations for first home buyers, and Parramatta has ranked first for the whole year. Established apartment pockets such as Parramatta, Ryde, Hurstville and Wentworth Point were credited with widening the choices on offer. A second cluster is forming along the northwest corridor, through Ryde, Castle Hill and Rouse Hill.
That matters because these are precincts with existing transport, shops and schools. Buyers are paying for access, and accepting less space to get it.
Vacant land and the tax signal
The land figure is the one to watch. The firm’s chief operating officer tied the rise to forthcoming reforms that limit negative gearing benefits to newly built homes. If the incentive now favours new construction, land and off-the-plan purchases become more attractive to investors, because they are the cheapest route into a new dwelling.
But there is a catch. Whether investors keep pushing that share higher is still an open question, and the executive said as much. A tax-driven bump in land purchases can fade quickly if construction costs, financing conditions or build timelines make the numbers harder to justify. For background on how the rules work, see our guide to negative gearing, CGT and investor tax.
There is also a gap between buying land and getting a finished home. Land sales do not add housing supply until someone builds on them, and that lag matters for rents and prices.
Key numbers
- Houses: 55 per cent of NSW purchases in Q3, from 67 per cent in the prior quarter
- Strata dwellings: 37 per cent of buyer choices
- Vacant land: 7.58 per cent, up for a second straight quarter
- First home buyers: nearly four in five purchases were apartments
Dubbo and the regional surprise
Regionally, Dubbo again ranked first overall, with Port Macquarie and Orange also placing high. The pull factors are affordability, jobs and services. In the executive’s view, regional NSW has moved well away from the edges of the market, especially now that higher interest rates are squeezing household budgets.
That fits a simple rule of thumb: when borrowing capacity shrinks, buyers look for the cheapest place that still has employment. For some, that is a western Sydney unit. For others, it is a regional centre with a functioning local economy. Our look at how borrowing capacity is shrinking faster than prices are falling shows the same squeeze in Victoria.
What this does to house prices and apartment supply
There are two second-order effects worth thinking through.
First, if first home buyers are leaving the house market, demand for entry-level houses should soften at the bottom end. That could ease some price pressure on the cheaper end of the detached market, though it will not necessarily reach the premium suburbs.
Second, strong first-home demand for apartments should, in theory, support new unit supply. In practice, developers need pre-sales, finance and workable costs to start building. Buyer demand alone does not start a project. The state is already behind on its targets, as our piece on the housing accord shortfall shows.
What this means if you are buying
If you are a first home buyer, the data points to where competition is concentrated: established western Sydney apartment precincts and a handful of regional centres. That is where you will find the most rivals, so budget for it.
If you are comparing a unit with a house further out, price the full ownership cost, not just the purchase price. Strata levies, building condition and resale depth all matter more with apartments. Stress-test repayments at a higher rate than today’s, given how much of this shift is driven by tighter budgets.
One step to take this week: pick two or three target suburbs and check what has actually sold, not just what is listed. Then work out your borrowing limit on a conservative buffer before you go inspecting.
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General info, not financial advice.
