Interestingly, it appears that the value of a house/unit/property is mainly decided by the location rather than the condition of the house/unit. A house built 30-40 years ago will have more or less the same value as that of a relatively new one (however, we cannot disregard that older blocks have larger land sizes, but new houses could have better conditions such as higher energy ratings). Further, house prices in different suburbs of the same state/province can vary vastly purely for reasons such as the availability of popular primary/secondary schools. As a result, it appears, somewhat strangely though, that if one is looking for a more affordable place to live, he/she will have to go to the extreme extents of relocating.
http://www.abc.net.au/news/2017-12-05/how-long-does-it-take-to-save-a-home-deposit-in-australia/9225272
Housing condition is certainly a factor to its price, albeit probably less significant than its location. A hedonic model can give you some ideas about their relative magnitudes. Besides, housing condition might be endogenous to location. Housing in "bad" locations might be in worse condition than those in good locations. This is not strange or surprising. It's just ordinary market mechanism.
Please consider the possibility that it is the value of land that is the primary function of location. This does not suggest that the value of the physical capital attached to the land is not a function of location. However, the big story is probably land value.
Location, location, location=land value as banking collateral, since Sumerian times.
There is a hedonistic model of housing pricing. It includes mainly square meters, but also location and other factors (like view, cleanness of air, floor, balcony, etc). Location may be responsible for a higher fraction of price than size. A 30 q.m flat in the city of London can be more expensive than 100 sq.m house 100 km from it.
Location defines the closeness to city center where typically most of jobs are located. You pay land rent as a compensation for transport cost to make agents indifferent. This is Central Business District theory about price pattern in a city.
You can look at my working paper to find that average land rent per capita (and thus housing price index) is growing with the city size: Conference Paper Aggregate and Average Land Rent in Cities
Chandana, your data about time to save for deposit in Australian cities confirm this: 8.2 in Sydney and about 4 in smaller cities. This is too much for 20% deposit. This means that overall price needs 40 years in saving in Sydney. Impossible for a normal family. Why are then people not moving to villages?
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