There has been a big swing towards apartment living over the past decade due to affordability; an undersupply that makes it difficult to buy houses in desirable areas; and an increasingly time poor society seeking secure, low maintenance living convenient to work, cafes, shops and beaches.
According to BIS Shrapnel, there are two high-rise apartments being built for every five detached houses across Australia today, which is double the historical rate.
Gen X and Y are driving the trend, preferring apartments due to affordability and proximity to tertiary education, cafes, nightlife and the CBD. They’re also delaying marriage and family, so their need for a bigger home comes much later in life and by that time they’re so used to apartment living, many simply buy a bigger one instead of changing to a detached house with a backyard.
The older generation is also having an effect, with a huge wave of downsizing having barely begun across the country to date – largely delayed by superannuation losses incurred during the GFC.
The construction industry is responding to changing demand with high density building approvals in Sydney more than doubling from 9,932 in FY11 to 20,354 in the year to March 2014, with strong activity expected to continue for the next five years. Sydney’s population will grow by 1.575 million people (36.7%) over the next 15 years, so we need to keep building at a rapid rate. Inner Brisbane is also experiencing a construction boom, with 5,500 new apartments coming online between June and Christmas this year.
While medium to high density living is becoming a necessity due to incessant population growth and natural borders limiting urban sprawl, it is also becoming more desirable as a lifestyle choice.
Real estate choices are intrinsically linked to lifestyle choices and changing demographics. We live in a society where couples without kids are expected to overtake the nuclear family household in less than two decades due to the aging population and more couples choosing life without children. The lone person household is the fastest growing demographic of them all, expected to comprise almost 30% of our households by 2031.
So, we’ve got a huge increase in single and couple households and generally speaking, these demographics have no interest in mowing lawns and doing everything else that goes with running a house. With no kids, they don’t need a backyard – they’d much rather be close to work transport and a short walk to shops, cafes and beaches; with a nice little balcony their ideal outdoor space.
ABS stats show that over the past 10 years, apartment living has spiked in Sydney, up from 23.9% in 2001 to 25.8% in 2011; while those living in houses decreased (63.1% to 60.9%). In Melbourne, apartment living is up from 14.3% to 15.3%; while living in houses dropped from 74% to 72.6%.
What’s the upside of apartment living?
- Often a more affordable option
- Residents’ facilities such as gyms, pools, gardens and concierges
- Much lower maintenance
- More of them are better located, generally around major transport, shops and cafes
- Increasingly modern design with as much internal space as a house, if desired
- Great security – off the ground with security intercom entry
- Available in a wide variety of locations outside CBDs, which is important for downsizers who want to leave their family homes without leaving the area they know and love
- Easier to buy for first home buyers, who are incentivised to purchase new over established properties through government grants and stamp duty concessions
Here’s another upside to apartment living. Historically, houses have appreciated faster than apartments but the gap is definitely closing. In the 12 months to June 30, Sydney apartment prices grew 12.2% compared to houses up 16.2%. Brisbane apartments were up 5.4% versus houses at 7.2%.
The great thing about the real estate market is that it keeps evolving and that’s what the Australian Dream has done. I wouldn’t call desire for the quarter acre block redundant but it’s definitely the more traditional dream compared to what most city dwellers want in a home today.