A July article declared 2023 to be “The Year of the Apartment”. At Hotspotting we agree that the year is seeing a growing body of evidence that apartments are emerging from the shadows of standalone houses as a worthy competitor for investment dollars.
As at July 2023, apartments overall were outperforming standalone houses in a number of ways – including faster growth in rents, superior price growth rates for much of the past 12 months and a majority of new dwelling approvals.
University of NSW’s City Futures Centre research has found that at least 16% of the population now live in dwellings such as apartments, townhouses and retirement villages.
It said there are more than three million strata and community-titled lots in Australia.
More than 200,000 new lots like units and townhouses were created in the last two years and nearly half (48%) of people living in private apartments are 20-39 years old.
More apartment households rent than are owner-occupied – with 47% of stock being rented.
Data from domain.com.au shows that apartment prices in Australia have surged back to their peak, driven by a persistent demand-supply gap.
According to real estate economist, Nerida Conisbee, the future holds the promise of more Aussies embracing apartment living, but the country's housing density levels still lag behind those of other nations.
Conisbee hailed 2023 as the “year of the apartment” due to the rebound in prices, which barely dropped in the previous year.
She also stressed the importance of promoting increased housing density to ensure greater liveability in cities and equitable housing options for future generations and people from diverse income levels.
Without boosting housing density by constructing more apartments, Australian cities face ongoing urban sprawl, which could prove expensive for households and hinder young buyers from purchasing homes in established suburbs and downsizers from staying in their
Conisbee’s economic report revealed that apartment price growth over the past year has mirrored that of houses, and in some cases bettered it – with apartment rentals increasing twice as fast as those for houses nationwide.
Despite this Australia remains far behind global counterparts in terms of housing density. London, Singapore, and Hong Kong, three of the most densely populated cities in the world, predominantly consist of apartments.
In the City of London, apartments make up 94% of dwellings, while Singapore and Hong Kong have 93% and 84% living in units.
In contrast, Sydney, Australia's most densely populated city, falls sixth on the list with only 46% of residences being apartments, trailing behind Tokyo and New York City.
Conisbee highlighted the low density in Australian cities, especially in Hobart, where just 15% of homes are apartments, leading to housing challenges for students and downsizers.
But we expect this to change, with more and more Australians choosing to live in apartments and townhouses, driven not just by affordability but by lifestyle choices.
And, as that happens, we expect to see apartments challenging that dominant real estate paradigm, that house on land always outperform apartments on capital growth.