Approvals for the construction of flats, townhouses and semi-detached houses are approaching their highest level in 20 years as Australians turn to smaller, more affordable homes.

In the year to November, multi-unit dwellings accounted for 43 per cent of all home building approvals, well above the 20 year average rate of 33.7 per cent, according to the latest BankWest Housing Density report.

The approval numbers show smaller dwellings are almost as popular as free-standing houses in the current market.

But that type of living remains a capital city phenomenon, where approvals in those cities account for nine out 10 new homes.

Bankwest executive general manager of retail Andrew Whitechurch said approvals for smaller homes increased markedly from 2011, when the census revealed capital cities accounted for 76 per cent of medium density dwellings.

“It’s likely first home buyers are boosting the popularity of medium density housing as they are finding it more and more difficult to afford a standalone house, especially in our capital cities,” he said.

“Increasing competition for housing and higher prices will no doubt lead to further growth in medium density housing approvals in the future.”

Bankwest research also shows units are considerably more affordable in the capital cities.

It takes an average 3.3 years for a first time buyer couple to save a 20 per cent deposit on a median priced unit, compared to 4.1 years to save for a freestanding house.

Proportion of approvals made up by capital city unit blocks

• Sydney – 64.5pct
• Darwin – 58pct
• Canberra – 57.7pct
• Brisbane – 54.4pct
• Melbourne – 54pct
• Adelaide – 31.9pct
• Perth – 26.8pct
• Hobart – 10.5pct

(Source: Bankwest)

– with AAP