Australia's housing affordability crisis is being driven by structural forces in the detached house market — not a shortage of apartments — according to new peer-reviewed research from UNSW Sydney published this week in the journal Cities.
The study, led by Professor Chyi Lin Lee from UNSW's School of Built Environment, analysed nearly three decades of housing data across Sydney, Melbourne, Brisbane, Perth, and Adelaide. It challenges one of the core assumptions behind current federal and state housing policy: that ramping up apartment construction will meaningfully ease affordability pressures.
"House prices are driving the whole system," Lee said. "When house prices move, they significantly affect units, but not the other way around."
The research introduces what the authors call a "two-market spillover model," separating the housing system into detached houses and units, and tracking how price movements travel between them and between cities.
The results are unambiguous: price shocks originate in the house market and spread outward. The reverse relationship is far weaker.
"Houses and units are not interchangeable, and this challenges the idea that boosting apartment supply alone will improve affordability," Lee said. "The assumption that units can substitute for houses at scale doesn't hold in the data."
The gap between house and unit prices widened sharply during the COVID-19 pandemic and has not closed since, with significant divergence persisting across capital city markets. According to Cotality's April 2026 Housing Chart Pack, annual dwelling value growth across major capitals ranged from 24.3% in Perth to just 3.4% in Melbourne.
Perhaps the most significant finding for brokers is the role of investor activity. The research found that nearly 80% of price spillovers occur between cities rather than within them — a pattern the researchers say points directly to investment behaviour rather than local housing demand.
"Because Australia's capital cities are widely dispersed, cross-city price movements are unlikely to reflect typical housing needs," Lee said. "Instead, they indicate investors shifting capital between markets in search of higher returns."
The RBA's May 2026 Bulletin independently corroborates that finding, noting that investors have historically exerted a greater influence on housing market cycles than owner-occupiers, with their decisions driven primarily by financial returns rather than finding a place to live.
Perth has emerged as a major source of cross-city price spillovers since the pandemic, joining Sydney and Melbourne as a market that shapes conditions elsewhere. Adelaide, by contrast, functions largely as a price receiver.
The researchers conclude that current policy settings are treating a symptom rather than the cause. Lee points to demand-side measures — tighter investor lending, adjusted tax settings, and better cross-state coordination — as necessary complements to any supply response.
That shift is already under way: from February 2026, APRA limits high debt-to-income mortgage lending to 20% of new loans for each lender, with investor and owner-occupier portfolios capped separately.
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