Apparently owning an expansive house with a white picket fence and garden with stretching green lawns is no longer the Australian dream retirees and many wealthy families
Instead, they are rightsizing, or downsizing, for the perfect lifestyle according to Knight Frank's RightSizing Report 2022
Key findings from the report are:
- Australians who are ‘rightsizing’ – downsizing to luxury apartment living – are dominating activity in the top 5% of Australia’s residential markets.
- Rightsizers are contributing to the surge in prime and super-prime sales, with the first half of 2021 experiencing almost eight times the number of super-prime apartment sales ($10m +) than the 10-year average.
- The upward pressure on prices at the top end of the market isn’t likely to ease, with luxury apartment prices in high-rise projects rising more than 30% across the major cities since June 2015. Concerningly, the pipeline of new apartments in prime regions around Australia will fall by 39% over the next three years.
- Data reveals developers have started to incorporate more 3-bedroom configured luxury apartments to cater for ‘rightsizers’.
Rightsizing
Two years have passed since Knight Frank first introduced 'rightsizing', 'rightsizers' and to 'rightsize' to the Australian property industry -
that is, ultimately the downsizing lifestyle trend towards luxury apartment living.
In their recent report they examine how this trend is panning out in light of COVID-19.
And Knight Frank found that despite living through multiple lockdowns throughout a global pandemic, the concept of living in a luxury apartment in the sky, with house-like proportions, is still an aspiration for many across Australia.
Some may have felt the need to pause or delay their purchase over lockdown, to await confirmation of changing work patterns or to simply reassess their lifestyle, but they haven't been deterred as for many, the intention is still there to 'make the move' to a low maintenance way of living.
Others are keen to get their passport out to travel to their second homes located around the world and are attracted to the ease of lock-up-and-leave when residing in a secured apartment residence.
Knight Frank saw that the pandemic has induced the possibility of a co-primary home, where the second (holiday) home is now being treated as much equal to a primary home, as the main residence.
They feel that as business activity picks up in the city centres, a rightsizer pad in the city is likely to become a preferred option for those who have become more accustomed to spending increasingly more time in their coastal or country homes.
Why rightsize?
Whether they are entrepreneurs, power couples, families, active retirees or international investors, rightsizer's experience moving to a luxury apartment often shares a similar narrative.
What buyers want
The Knight Frank Global Buyer Survey reveals howare buyers' priorities, motivations, and attitudes are changing towards apartment living as well as a unique insight into what impact COVID-19 has had on domestic housing demand in Australia.
Australians are on the move
Since the start of the pandemic, one-third of Australian respondents have moved house.
Given strict lockdowns imposed at different times since March 2020, it was somewhat expected that one in four Australians relocating wanted more outdoor space, listing this as the main reason for their move.
Of those moving houses in Australia, 18% was for a change of city/country, with 13% moving closer to a city centre location, while 13% found a home with more indoor space.
A further 18% of Australians surveyed are inclined to move house within the next year as a result of the pandemic.
Our cities are mounting a comeback
The 'race for space' has grabbed headlines globally but cities look to be mounting a comeback.
Perhaps most surprising, is the extent to which cities are back in favour.
In Australia, of those respondents that are more inclined to move in the next 12 months, 42% are looking at a city location and 15% are moving for downsizing, or retiring, reasons.
Buyers' motivations and priorities
Although we've been more confined throughout the pandemic, 42% of Australians surveyed said they had no change in their propensity to move to an apartment and 17% believed they were more likely to adopt this type of living.
When citing the property features of most importance when choosing their next property, two-thirds of Australian respondents selected having a home study/office, with 46% planning to commute three days, or less, to an office environment once restrictions have been lifted.
More outdoor space (65%) was next ranked, then access to high-speed broadband (64%), followed by more indoor space (63%).
Despite the pandemic, 56% of Australian respondents had no change in preference for homes with limited touchpoints when restrictions end, including pandemic-conscious design/ wireless/ contactless features.
When considering location, more than half of Australian respondents said proximity to green space was a more important factor once restrictions end (63%), followed by good air quality (56%) and good views from their new home (51%).
Impact of the pandemic on Australian property buyers
This is the second time Knight Frank has undertaken the Global Buyer Survey.
Last year, a few months into the pandemic, the survey was firmly focused on who was moving and where.
In mid-2021, Knight Frank's global residential team were keen to understand if the changes we're seeing locally are permanent, and for those who have moved home since the start of the crisis, what are their next priorities?
Both the results from the Global Buyer Survey, and the strong residential sales being achieved in the Australian market over the last 12-18 months, show the continually increasing appetite of buyers for both primary and secondary homes.
Whether buying or renting, the COVID-19 pandemic has caused Australians to prioritise space in their homes, with a willingness to spend big to achieve this.
The gap between buyer demand and appropriate property supply is widening, with residential construction difficulties continuing to delay the delivery of the new products.
Rising prices are creating a highly pressurised buying environment given the low cost of borrowing and in many instances, being driven by fear-of-missing-out (FOMO) from buyers across many of our cities.
Throughout the pandemic, lifestyle has become increasingly more important for Australian buyers, and this has manifested in a focus on location and for those seeking to rightsize to an apartment, an increased level of interest in branded residences.
Prime performance
Price growth solid
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Newly built, or off-the-plan high-rise apartments, have seen strong price growth of 36% since June 2015 outperforming both the Australian stock market (34%) and the established apartment market (31%) across the major cities.
Sydney was the only city to buck the trend over this time, with established prime apartments recording 48% growth compared to 30% for new apartments.
Buyers were left with very little choice, with the limited new luxury products being launched across Sydney prime regions throughout this time.
This made established apartments significantly more competitive with a highly motivated buyer pool.
Apartments are still on the agenda
Although the pandemic encouraged standalone house price performance to overtake the apartment market, it also accelerated the concept of the co-primary home.
In many cases, this will create a bolthole in the city in preparation for business activity returning to the office environment, whilst also providing residence in their country and coastal second homes.
Over the coming years, increasingly more will seek a low maintenance home as their main residence, given the transient global lifestyle will return for many of the ultra-wealthy population.
This pent-up demand will continue whilst new luxury apartment delivery and sales listings remain shallow across almost every prime region of Australia.
Upward momentum in prime apartment sales volume
The first quarter of 2021 saw all five major Australian cities record positive annual growth in sales volume, only the third time this had occurred over the past ten years.
We then saw for the first time, a consecutive second quarter of positive growth, and this time collectively all cities recorded a strengthening upward trajectory.
History has shown this tends to lead to further price growth, bolstering the outlook for the prime luxury apartment market over the coming year.
Super-prime apartment sales surge
As the preference towards luxury apartment living continues, so has the delivery expectation to a truly exceptional global standard.
This super-prime apartment market tends to be tightly held across Australia, so despite steadily expanding over the past decade, there has only been an average of 8.7 sales transactions a year from 2011 to 2020.
Outstandingly, the first half of2021 was almost eightfold above this 10-year average.
Of these 2021 sales, 70% were counted in Sydney's Crown Residences at One Barangaroo project, given they had officially exchanged, settled and publicly registered within this time.
The impact of declining site sales
Residential sites suitable for low-rise, mid-rise, and high-rise development across the prime regions within the major cities have trended below pre-2013 levels since 2018, continuing a decline in volume since the 2014 peak.
This reduction in the number of potential sites has led to a diminishing pipeline of new apartments and significantly contributed to the ongoing upward pressure on prices.
On top of this, before turning the first sod, developers face uncertainty with delivery timelines which have come with the delay in securing building materials stuck in offshore supply chains and sourcing skilled workers, although this was already an issue plaguing the industry prior to the global pandemic being declared.
At the time of publication of Knight Frank's report, a number of new sites sales were in due diligence, indicating the total volume reached in 2021 is very likely to overtake the 2020 total.
However, this recent upward trajectory in site sales is still a long way from correcting many years of undersupply across the prime regions.
Diminishing pipeline
The total number of apartments in low-rise, mid-rise and high-rise projects averaged 26,040 a year, across Australia's major cities since 2015.
This average is expected to fall by 39% over the next three years when considering those projects currently under construction, being marketed and are possible to be built within this timeframe - this contraction is led by Australia's largest three cities-Sydney, Melbourne and Brisbane.
Bucking this trend is Perth and the Gold Coast.
Both cities welcome their modestly elevated number of new apartments in the pipeline following a chronic level of undersupply and additionally for the Gold Coast, a rising population is drawn to the relative value and balmy lifestyle.
More accommodation configured
From Knight Frank's client enquiries, right-sizers generally prefer a 3-bedroom configured luxury apartment, closely followed by a 2-bedroom (plus study) depending on the city.
Tracking the distribution of apartments by their number of bedrooms has revealed developers, in the three-year pipeline, have shifted towards building a higher proportion of apartments with 3-bedrooms to accommodate this rightsizing trend.
This average resulted across all low-rise, mid-rise and high-rise projects.
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