Brisbane's Housing Paradox: What Happens When New Apartments Are More Expensive Than Houses?

What the growing gap between suburban homes and new apartments means for Brisbane’s future.

Generally speaking, it is the life's purpose of most Australians to end up in a suburban home. This is our national Final Destination; our collective Direction of Travel. The backyard, the shed, the two car garage, the Good Room that only gets used on Christmas Day — and of course, the never ending renovation.

To not have at least one suburban home at the end of This Australian Life alludes to some abnormal, unfortunate circumstances. How could this happen? Messy divorce? Nigerian prince? Dothraki horde? It is incumbent upon the Australian in question to explain precisely why one would live any other way.

Within this cultural context, apartments are seen by most Australians as a means to that inevitable suburban end, and not the end itself. Generally speaking, Australians view apartments as that less desirable, albeit more affordable option. A necessary stepping stone to home ownership, or an investment property to be endured by the less fortunate. And in my fair home of Brisbane, they have been exactly that.

Yet when we look abroad and see other, more densely populated countries, we see that there is a tipping point where that transition from detached dwellings to townhouses and apartments gets made.

Historically, the narrative amongst people like me has been that Australians would make this transition to higher density living when those macro-scale economic headwinds eventually take the choice away from us — or, the point where a suburban house becomes unaffordable, while apartments and townhouses still are affordable. You see this in major global cities, where the working class live in apartments, the middle classes live in well-located terrace homes and the wealthy live in houses — a bit sad, but there is a kind of brutal, darwinian logic to it.

But now, because of a perfect storm of intertwined factors driven by the housing crisis, an immensely weird situation has arisen in Brisbane that’s turning that old narrative on its head.

New apartments are now a luxury purchase

The post-COVID inflationary environment, exacerbated by planning and building regulation changes, tax settings, development charges, competition from public infrastructure projects and (and yes, many others) have all converged to drive the cost of construction through the roof.

Because of this major cost escalation, developers now need to sell new apartments at the following (approximate) prices for a 110m², 3-bedroom apartment:

• ~$1.5 million in Melbourne (approx. $14k/m²)

• ~$1.6 million in Brisbane (approx. $15k/m²)

• ~$2.2 million in Sydney (approx. $18k/m²)

And yes you did read that right, Brisbane's median dwelling values are now more expensive than Melbourne.

Wait...What!?

To me, Brisbane is objectively The Greatest City In The World, but even someone as biased as I has to admit that this is pointing to some kind of major market distortion, likely driven by the fact that Brisbane has in recent years had the some of the highest escalations in construction costs in the country, combined with high levels of interstate migration from NSW and VIC.

Brisbane's existing homes are still significantly cheaper than new apartments

Now introduce to this bizarre equation the fact that in Brisbane, buying an existing 3 bedroom suburban home in a half decent area is still significantly cheaper than $1.6 million. You can still pick up a perfectly liveable 3 bedroom home on a 600m² block for about a million in many good suburbs. Yes, it’ll need some love, but let’s be real, if you're not renovating (and constantly talking about renovating) — are you even Australian?

Given our pathological drive towards suburban living, this is quite a strange situation! The type of housing that most people want to live in is significantly cheaper than the type of housing that most people don't want to live in. It would be like if second-hand Ferraris were cheaper than a new Hyundai hatchback (sorry Hyundai). As paradoxical as this seems, this is where we are in Brisbane… for now.

Where to from here?

This situation where apartments are significantly more expensive than well-located detached homes seems too absurd to be sustainable. So if this is an economy in transition, how could this transition unfold over the next few years?

Goodnight, sweet prince.

High density apartment projects are slowing down, nationwide

At the height of this housing crisis, in our hour of great and pressing need — today’s high construction costs and low labour availability means we are looking squarely down the barrel of a major slowdown in apartment projects.

No matter how hard we may wish it were otherwise, the number of Brisbanians out there with the ability to spend $1.6m on a new apartment (but not a house) is very small — especially while that same sum will buy you a well-located palace in the same city. The demand created by this small group is an order of magnitude (or two) short of what we would need to densify our way out of this housing crisis via the private sector alone.

While this remains true, non-luxury apartments are unlikely to be delivered in any meaningful quantities for the immediate future.

This is phenomenon is coming to fruition on the Gold Coast, with recent research from the Property Council finding that:

53% of the Gold Coast’s apartment pipeline is at a moderate to high risk of being withdrawn, or delayed, in 2026-27 as cost constraints increase their stranglehold on the industry.

The research identifies that Gold Coast’s apartment supply pipeline could fall from 1,900 units in 2025 to 1,400 units in 2026, with just 50 units relatively certain to be delivered in 2027.

Not exactly the Big Build we were shooting for.

Brisbane’s property values will skyrocket again

If you’re lucky enough to own a home already, congratulations friend. The good times have only just started to roll.

The gap between the cost of buying an existing dwelling versus a brand new apartment has never been higher, with off-the-plan apartment sales remaining a fraction of where they once were.

With all of this crisis-level demand unable to be met by the new apartment market, and construction costs and general uncertainty being the way they are — a great deal of this demand is going to bear down on existing properties.

Failing some kind of miracle where construction costs for apartments somehow go back to where they were in 2019, the only way for apartment projects to make sense again is for existing houses to become even more expensive than apartments. Gentlemen, we are circling the drain.

Look at Sydney for example. For all the problems they have down there, they at the very least aren’t in Brisbane’s bizarre situation, because while a new 110m² apartment might cost a jaw-dropping $2.2 million in Sydney — wait until you hear what a well-located 3 bedroom house costs. For the Brisbane context, this means property values could be heading towards the surreal levels previously only seen in Sydney and Melbourne. This could get triggered if and when interest rates come down again, where the increased borrowing capacity of every desperate Millennial — FOMO-ing at the mouth — will inevitably get poured directly into the already over-inflated housing market.

In other words: The beatings will continue until morale improves.

Behold, your saviour.

Greenfield housing is the only hope for affordable new supply, delivered by the private sector

Most of the Urban Visionary Class loves to lament the fact that greenfield housing (and urban sprawl) always ends up delivering the brunt of new housing growth. I myself have done my fair share of lamenting in this regard. Deep down in the cockles of my heart, I still do believe that it would be nice if we didn’t have to keep endlessly expanding our cities outwards.

But why does greenfield housing always end up delivering the majority of new supply? Greenfield housing is — and always has been — the path of least resistance. Infill renewal projects are inherently burdened by higher costs, higher land values, more complexity and higher risk — meaning those infill projects that do get built will be inherently less-affordable.

So from one Urban Visionary to another, one has to acknowledge reality. With construction costs being where they are, new greenfield detached homes and townhouses are the only venue where the private sector can produce anything even remotely affordable.

If true, this also means that the immediate future of affordable new supply in Australia lies in the hands of a handful of major developers. So perhaps we should be demonising them a bit less and engaging with them a bit more, because they’re kind of our only hope for new supply right now.

There’s a lot more to sprinkle distribution than meets the eye.

Upzoning policies will yield underwhelming results until construction costs normalise

In recent months there has been a couple of interesting planning reform-based housing policies like NSW’s Transport Oriented Development (TOD) planning reforms or Victoria’s Department of Transport and Planning announcing their updated plans for boosting housing supply in activity centres.

NSW’s policy allows for greater density (7ish storeys) within walking distance around 37 key train stations across Sydney, while Victoria’s policy fast-tracks the structure planning process across 10 activity centres across metro Melbourne with the broader goal of unlocking an additional 60,000 dwellings.

5 years ago, these policies would have had me cheering — and I do think they are positive long term policies that should have been implemented decades ago. But, because of the stranglehold that high construction costs have upon the development industry, I predict that their near to medium term impact will be fairly underwhelming.

Why? Imagine if a typical chocolate cake cost $47 million to produce, perhaps due to some kind of icing shortage combined with a militant bakers union demanding extortionate wages for seemingly unskilled tasks like candle placement and sprinkle distribution. Responding to the cake shortage, the government decides to boost cake supply by putting a cake shop in every neighbourhood. While well-intentioned, the problem wasn’t that we lacked places to buy cakes, it was that cakes were too expensive to make!

In the same way, these policies only change the capacity for extra dwellings in key areas, while not changing anything about the fact that no-one can afford to buy a new apartment off the plan.

This gets to a greater issue of long term strategies versus the bottlenecks that are immediately in front of us. We must be able to simultaneously hold two the following two ideas in our mind:

1. That policies like upzoning are an important, long term policy towards a more sustainable settlement pattern and the long term boosting of the construction industry’s capacity to deliver more supply.

2. That until construction costs normalise, upzoning will have a negligible impact upon our ability to deliver new supply in the near to medium term.

Governments need to become co-investors in private sector housing projects

Failing some kind of major correction in construction costs, if we want any apartments to be built over the next few years, governments are going to need to become a co-investor in new developments — at least for the near term.

Governments could commit to buy or subsidise a proportion of new units in eligible projects in order to provide sufficient pre-sales and ensure that projects actually get built — instead of waiting around for conditions to improve.

This would allow potential projects that would have otherwise been sunk by high construction costs to access bank finance and proceed with construction. From there, governments could use these units to provide subsidised rent or social housing. Governments could even just sell these units to people in rent-to-buy or shared equity schemes after holding them for a number of years — using any profits to reinvest in public housing projects.

A positive step in this direction is Queensland’s Incentivising Infill Development Fund, which is one of many initiatives within the greater Homes For Queenlanders Plan. It allocates $350m towards supporting the delivery of more diverse, affordable, and well-located homes. The fund will support eligible housing projects that can increase housing density and diversity where it is desired. Market ready projects which increase density in areas with high demand may be eligible for support, including relief from council infrastructure charges. By providing targeted support in the form of known infrastructure costs, the fund limits the potential for increasing costs to be passed on to homebuyers.

These are critical ways Governments can support housing projects that would have otherwise slipped through the cracks in this bizarre economy.