Last decade’s high-rise apartment boom was built on shoebox apartments.
As illustrated below by the ABC, small apartments with two or fewer bedrooms dominated apartment supply across the three largest capital cities:
Unfortunately, many of these ‘shoebox’ apartments were also riddled with defects. Sydney’s Opal and Mascot Towers, for instance, were the most visible examples requiring evacuation due to extensive cracking.
These flaws were highlighted in the Four Corners Report “Cracking Up,” which revealed a systemic failure to control and safeguard the purchasing public from subpar workmanship.
Engineer Leith Dawes cautioned that buying an off-the-plan apartment in Australia had become “Russian Roulette” due to the numerous undetected building flaws.
Now that construction costs are soaring, developers are focusing on the expensive end of the apartment market, targeting prestige buyers rather than entry‑level households.
Developers say affordable projects no longer stack up financially, leaving first‑home buyers locked out of the very stock meant to ease the crisis.
They are increasingly chasing $1 million-plus price points where margins are achievable.
As a result, apartments no longer function as the traditional entry‑level pathway into ownership.
“We have an issue that has been brewing for a long time, and that is that low-income households are really struggling to find affordable housing”, said AHURI head of development Tom Alves.
“But the other bit that’s unrelated, really, is that we have an issue now where it’s difficult for property developers to be able to deliver housing affordably, and that’s impacting production. But the flip side of that is – and it seems counterintuitive – the market has disappeared”.
“The impact of this is a large number of households in significant stress and a large list of people looking to access social housing and finding themselves priced out”, he says.
The fundamental problem is summarised in the following chart: apartments have become too expensive to build.
According to the Australian Bureau of Statistics (ABS), it cost $608,200 on average to build a unit in the December quarter of 2025, 11% more than the cost of building a detached house ($549,900).
Since the end of 2019, the average cost of building an apartment has risen by 90%, versus a 62% increase for detached houses.
The entry-level apartment has disappeared from developers’ sites because it costs too much to build and cannot be delivered at a price low enough to provide a decent financial return.
