Apartment Markets Prove More Resilient Than Detached Houses Amid Rising Interest Rates

Australia's residential property market is undergoing a notable shift as rising interest rates exert downward pressure on property values. Following five cash rate increases by the Reserve Bank in 2026, borrowing costs have increased significantly. However, property research group Cotality reports that different housing types are experiencing varying degrees of impact, with detached houses facing steeper declines than units.

National house prices have declined for seven consecutive months, contrasting with conditions seen in November of the previous year when houses primarily drove price growth. During the pandemic period, units underperformed relative to detached homes. Current affordability pressures, however, have prompted many buyers to trade traditional backyards for apartment balconies, allowing unit values to maintain stronger stability through the current downturn.

Data for the combined capital cities indicate that house values have decreased by 5.9 percent since the end of January. In comparison, unit values have dropped by a more modest 3.6 percent. This divergence underscores how housing affordability challenges are altering buyer demand across metropolitan markets.

The national median value for a house stands at approximately $1.1 million, whereas the median unit value is recorded at $739,000. This $361,000 price difference directly influences purchasing decisions as household borrowing capacity diminishes. According to financial comparison platform Canstar, the borrowing capacity for an individual earning the average full-time wage of $108,650 decreased by over $58,000 following the most recent interest rate increase. For a couple both earning average wages, the reduction approaches $117,000.

Cotality research director Tim Lawless stated that more affordable segments of the property market have generally demonstrated greater resilience as serviceability pressures on borrowers continue to intensify.