The perception that our cities are turning into mini-Manhattans given the high-rise apartment projects in our CBDs and city fringe is untrue, according to the results of the 2011 census.
Sydney leads the way to apartment living
Greater Sydney remains the apartment capital of Australia. More than a quarter of greater Sydney residents (25.8%) live in this type of dwelling, and this proportion is virtually unchanged over the last 5 years.
Apartments as a percentage of the total housing mix in greater Melbourne have in fact fallen as a dwelling type from 16.1% in 2006 to 15.3% in 2011 despite the total number of flats and units rising from 217,836 to 219,111 during this period.
According to the census, 11.7% of greater Brisbane residents live in flats, followed by Adelaide (10.4%) and Perth (9.1%).
If we compare this to the number of people living in apartments in other major capitals around the world, you can see that we have a long way to go to catch up.
Our lifestyles are changing
For generations backyards, barbecues and big houses have been the norm for Australian homeowners, but that’s all changing and now as our lifestyles are changing there is evidence of a growing preference toward apartment-style accommodation in Australia.
Since more of us are swapping our backyards for balconies, apartments are my preferred style of residential investing today.
A 2012 report from the Grattan Institute aptly entitled The Housing We’d Choose, indicates a growing preference toward apartment-style accommodation in Australia. The study found that Australians want more apartment-style housing and are moving away from detached housing.
The report found we’re not building enough of the type of accommodation more and more people want. It suggests there are potentially thousands of tenants and home buyers out there who simply cannot find the type of accommodation they are seeking in the places they most want to live.
Over the years our perception of townhouse and apartment living has changed.
Where once we saw medium- and high-density developments as “slums” intended for lower socio-economic classes, in the last 20 years or so apartment living has become the practical and trendy alternative, in particular sought after by young, upwardly mobile professionals.
What of the future?
Today, the inner suburbs in our capital cities built out and the cost of constructing new apartment buildings is prohibitive – land costs more, construction costs have increased, and town planning regulations mean it’s much harder and more expensive to build new apartment complexes.
The skyrocketing cost of new construction means that the values of established apartments are being pulled up to maintain the price differential between established and new apartments.
Apartments make great investments
With the number of Gen Y’s looking for accommodation continuing to rise, rental demand for near city and inner suburban units and apartments will grow significantly in the coming years. And our old friend the supply and demand equation will ensure that rents for these types of properties keep rising, as will their values, as higher yields will entice investors back into the market.
Today apartments make great investments and in general appreciate in value equally, if not more, than houses in our capital cities and interestingly during the recent property slump apartments held their value better than houses.
And this trend is likely to continue as it’s about much more than affordability. As I’ve already explained, significant changes in our population profile and lifestyle priorities are creating a strong demand for apartment living.
Today, our lifestyles are vastly different to those of our parents. We’re working longer, we’re increasingly time poor and we’re starting families much later in life. This means proximity to work, transport, entertainment, cafes, shops and beaches is becoming more important than owning a piece of land. At the same time apartments are continuing to improve in design and size and are generally closer to the CBD than affordable houses.
It should be fairly obvious that more single households, smaller families and the impact of the baby boomers downsizing will continue this trend in the long-term. People are getting married later in life and apartments suit their busy lifestyles; and when a baby comes along, they will often stay in their apartment or buy a bigger one in the same location.
Case Study of a great investment
Here’s an example of a great apartment we bought for a client as an investment:
This 2 bedroom apartment is located in Summer Hill, a primarily residential suburb of the Inner West region, adjoining two of Sydney’s major arterial roads, Parramatta Road and Liverpool Road.
Despite formerly being working class, Summer Hill and many of the surrounding suburbs have gradually undergone gentrification over recent years. It features a mix of federation-era houses, as well as medium density apartment blocks near the railway station.
This great 2 bedroom apartment will make a first class long term investment for our client who secured it at an excellent price and a strong yield.
This is the type of property that has a level of scarcity, meaning it will be in continuous strong demand by owner occupiers (to keep pushing up the value) and tenants (to help subsidise the mortgage); bought in the right location (one that has outperformed the long term averages), at the right time in the property cycle and for the right price.
If you would like an investment like this, or to find out what type of property would suit your portfolio no one can help you quite like the independent property investment strategists at Metropole.
Remember the multi award winning team at Metropole have no properties to sell, so their advice is independent and unbiased.
If you want to find out a bit more about what is happening in your local market and what our research suggests is in store for us, join us at a free property briefing in Melbourne, Sydney and Brisbane or with our associates in Perth. Just click here NOW to find out more and reserve your place.
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