Buyers trading up to a three-bedroom unit face a far steeper price jump than those adding a bedroom to a house, according to new analysis from Ray White Group.
Moving from a two- to a three-bedroom unit typically costs $315K, close to twice the premium for going from a three- to four-bedroom house in the same suburb, Ray White economist Atom Go Tian (pictured) found.
“But maybe the most surprising thing is that upgrading a unit is more expensive than upgrading a house, even though units are cheaper to buy,” Tian said.
A second bedroom adds 41% to the price of a one-bedroom unit, and a third adds more than 46%. For houses, a fourth bedroom adds about 21%.
Tian said scarcity is one factor: three-bedroom units account for fewer than a third of unit sales, and in the priciest suburbs they are likely to be top-end penthouses.
In Sydney, the step from a two- to three-bedroom unit costs $451K, the highest of the city-wide figures.
Tian said that with units, “an additional room can nearly double the price because it comes with a full upgrade in amenities, service, and lifestyle.”
In Brisbane, three-bedroom units make up 38% of unit sales, against 22% in Sydney, and Rothwell-Kippa-Ring recorded the cheapest upgrade in any of the rankings: $44K, or 7.1%, for a third bedroom.
A fourth bedroom typically adds $175K for house buyers staying in the same suburb. Canberra is the priciest capital at $236K, ahead of Sydney at $227K. Regional markets come in about $20K to $60K below their nearest capital, with regional SA the cheapest at $133K.
Moving from four to five or more bedrooms costs $215K nationally, led by Brisbane at $264K and Sydney at $262K.
Buyers weighing those upgrades now have less to borrow with. Cotality estimated a further rate hike would take the fall in borrowing capacity across the current tightening cycle to around 11.5%, or more than $105K. The RBA delivered that hike on 3 November, lifting the cash rate to 4.85%, and the major banks are passing it on in full from 13 November.
“Safe to say the suburb you are in makes all the difference in how much an additional bedroom costs”, Tian said.
The cheapest suburbs for a bigger house are mostly on capital-city fringes, with Melbourne’s Kings Park topping the list at $60K. At the other extreme, a fourth bedroom in Toorak costs $2.44M, as the median rises from $3.29M for three bedrooms to $5.73M for four.
Units show similar extremes. In Sydney (North)-Millers Point, a second bedroom adds $824K and a third adds $2.74M.
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