Melbourne’s apartments, units and townhouses, long treated as the cheaper Plan B for buyers priced out of houses, could be the surprise winners of rising rates and government tax moves. A $382,000 gap between the city’s houses and its apartments has the latter expected to catch the eye of increasingly budget-conscious buyers into the future.

Nuestar and Hotspotting analysis of PropTrack data also shows apartment rents are rising faster than house rents in 114 suburbs across Greater Melbourne, the strongest result of any capital city market. Sydney followed with 104 suburbs, ahead of Brisbane with 69 and Perth 37. The shift comes as Melbourne’s median apartment price sits at $633,000, compared with $1.015m for houses, a 46 per cent price gap.

Melbourne apartment rents rose 4.9 per cent over the year, compared with 4 per cent for houses. Caulfield South and Briar Hill led Victoria’s apartment rent growth, each up 15 per cent over the year, followed by Patterson Lakes and Mulgrave at 14 per cent. Carlton recorded Greater Melbourne’s strongest apartment yield at 6.8 per cent.

Hotspotting founder Terry Ryder said apartments and townhouses were no longer being chosen only because houses were too expensive. “It’s easier to achieve a really excellent location and an affordable price with apartments than it is with houses,” Mr Ryder said. “Developers tend to build them in proximity to shops and schools and public transport. So more people can get a good location at a relatively affordable price.”

The property pundit said a long-held view apartments were inferior investments was becoming outdated. “We are now seeing attached dwellings competing with houses on capital growth increasingly because there are more and more cohorts opting for attached dwellings,” Mr Ryder said.

Real Estate Institute of Australia president Jacob Caine said higher interest rates and cost-of-living pressures had stretched household budgets, forcing many to reconsider what sort of home they could afford. “Buyers who may have originally been hoping for, or were in the market for, a free-standing home have had to seek out alternatives,” Mr Caine said. “For some buyers, being able to live in a suburb they love, be close to work, restaurants, night-life, schools, transport and community is more important than having a larger home further away.”

Zara Lend director Stephanie Jordan said most solo young buyers were finding their borrowing capacity would only stretch to a unit but warned not to treat every apartment as a smart purchase. She said older-style, low-rise, solid brick units in good locations were often a better first step than high-rise apartments with high owners corporation fees and lots of similar stock.