There seems to be a luxury apartment boom in Australia.
According to the latest PropTrack New Homes report, new home developers are increasingly focusing on the luxury apartment market as general construction costs continue to rise.
The report said that over the past twelve months, input prices to house construction rose 4.4%, primarily driven by high fuel and energy costs, making products more expensive to make and transport.
While this has made construction of more affordable apartments and most houses not financially feasible at present, wealthy "right sizers" (previously called down sizers) are in the market for good sized, well located apartments, and they can afford to pay for them.
PropTrack's data highlights that in the past 12 months, the number of 1-bed apartments on the market has decreased by 16%, whereas the number of 4-bed apartments has increased by 76%.
Additionally, the number of apartments under $500k has decreased by 40%, and the number of listings in the higher bands, such as $2-$3m and $3m plus, have increased by 34% and 41%, respectively.
Ms Karen Dellow, Senior Data Analyst at PropTrack said:
"As the cost of construction is so high, it is hard to make a profit on smaller, cheaper properties and therefore, fewer are being built, and more expensive properties that provide a better yield are replacing them.
In October, the highest volume of apartment development listings on realestate.com.au were 3-bedroom properties priced between $1-$2 million, closely followed by 2-bedroom units within the same price range.
There is an increasing market for high-end apartments, as cashed-up couples with no children and downsizers want to live a low-hassle lifestyle without foregoing luxury.
To cater to these cohorts, developers are creating developments with hotel-style concierge services to manage dry cleaning and dog walking and adding amenities such as home cinemas, wine cellars and restaurants."
It's tough for first-time buyers trying to start owning a home because they can't find affordable options.
New houses are a bit cheaper, but they're usually located in newer areas outside the city.
Even though prices are lower than in the city, they can still cost more than existing homes in the same area.
The report further noted that 35% of new house development listings on realestate.com.au are 4-bedroom properties within the $500-$750k price range, which may still be out of reach for many first-home buyers or those on lower incomes.
According to PropTrack's data, the top 5 property types with the largest year-on-year increase in enquiries for new apartments are all more than $1 million, with 4-bed apartments priced over $2 million, racking up the most enquiries per listing.
PropTrack also noted that now that most apartments are out of reach to first-home buyers, there is an increase in demand for medium-priced houses.
Enquiries for 2-bed houses between $500-$700k have increased by 2.8 times higher than last year.
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Data from PropTrack highlighted that the most in-demand new apartment development in October was Panorama, in Bowen Hills, Brisbane, where a 1-bed property starts at $495,000.
Regarding suburbs where enquiries are the highest, Surfers Paradise, Castle Hill, and Melbourne were top of the list."
Meanwhile, the most in-demand house and land developments are mainly in South Australia and Queensland and one in New South Wales.
Ms Dellow further commented:
"Rouse Hill Heights, in Sydney, had the most enquiries in October, closely followed by Signature on Nelson, in Box Hill, Sydney.
Both Queensland and South Australia have the most enquiries per listing, at 35 and 34, respectively."
In the last five years, building homes has had more than its share of problems.
Costs skyrocketed and there were big delays in projects.
About 2,117 construction companies shut down last year, which will keep affecting the number of new building approvals.
Because of this, Ms Dellow noted that:
"The changing landscape has meant that developers have had to change the types of properties they are building.
The downside to this is that many new developments are out of reach to first-home buyers during a time when the lack of affordable housing in Australia is at an all-time low.
This will continue until building costs decrease enough that developers can return to building cheaper properties to meet the needs of first-home buyers."
Putting all this together shows that there is clearly no end in sight for our housing or our rental crisis as we're just not going to build enough accomodation to house our burgeoning population.