Real estate research data is telling an increasingly strong story for apartment markets across Australia.
Apartments, so long considered inferior to houses on land for investment solidity and long- term capital growth, are mounting a serious challenge to the supremacy of houses in the minds of Australian investors.
In recent times, apartments have proved competitive with houses on capital growth and are out-performing houses on rental growth.
More and more Australians are opting to live in units and townhouses for their lifestyle and affordability features.
And apartments are grabbing an increasing share of the construction market with builders and Developers.
Among the growing pile of data charting the rising performance of apartment markets is Hotspotting’s recent analysis of prices nationwide for the next edition of The Price Predictor Index.
There are numerous instances in the major capital cities of suburbs where the median price for houses has dropped in the latest quarter but the median price for apartments has risen.
Brisbane provides a good example. There are many dozens of examples of suburbs with recent price decline for houses but rising prices for the more affordable unit options.
In the popular western suburb of Indooroopilly, the median house price fell (slightly) to $1,395,000 in the most recent quarter, but the median unit price rose 3.8% to $575,000.
In Hawthorne, the median house price fell 2.1% to $11.8 million, while the median unit price rose 16% to $695,000.
At bayside Wynnum, the house median dropped 2.1% to $950,000, while the unit median rose 3.1% to 590,000.
There are many other examples.
In each case, the price disparity between houses and units helps to explain the rising demand for units and the upward pressure on prices for units.
Meanwhile, a severe shortage of apartment rental supply could lift rents a further 13% in some inner-city districts next year as demand rises further, according to an analysis by major property company CBRE.
An estimated 570,000 new apartments are needed over the next three years across Australia’s capital cities – however, only 55,000 apartments are currently being built each year, according to Sameer Chopra, CBRE’s Pacific head of research.
He says: “This significant mismatch between apartment supply and demand will help drive continued rental growth in key city centre areas. We won’t see 30% rental growth like we’ve seen in the past year, but we’ll still see close to 10% rises because demand continues to outpace supply.”
Rental demand is expected to climb by 34,100 across Sydney next year, fuelled by strong population growth, but only 15,300 apartments are available, according to CBRE’s estimates.
In Melbourne, the rental market will be short by 23,800 apartments, Brisbane by 12,100, Perth by 10,500 and Adelaide by 4100.
Chopra says: “Some precincts will see larger population growth than others, with vacancy issues to be most acute in the inner-city major city centres and associated near-city suburbs.”
He says that, in most precincts around Australia, CBRE expects to see vacancy rates in apartment contracting by between 0.2% to 0.5% in the next 12 months.
This comes at a time when 80% of precincts have a vacancy rate below 1.5%.
Sydney’s inner west (up 13%) and north-east Brisbane (up 10%) are predicted to lead the rental increases as a result of these tight vacancies.
