The trend we have termed “The Rise and Rise of Apartments” continues to pick up pace. Across Australia, more and more buyers are opting for attached dwellings for lifestyle, for affordability, for convenience and for safety.
One of the features that draws growing numbers of buyers (and tenants) to apartments is location appeal. Not only do attached dwellings allow people to access property in good locations at cheaper prices than houses, but the average unit is better located than the average house.
A report titled “Measuring Home Price Differences” by Infrastructure Victoria has found that units consistently trump houses on proximity to desirable features.
“Units are located closer to selected infrastructure types, on average, than houses and townhouses,” the report says.
The report found that units were far more likely to be located close to train stations, tram stops, major activity centres and arterial roads than houses. “About 60% of units are within 1.6km of a tram stop, while this distance only includes about 20% of houses,” the report says.
This is one of multiple factors driving higher demand for units – challenging the dominant paradigm of real estate. That paradigm, still widely accepted in the real estate industry, states that houses always outperform units and townhouses on capital growth.
But that is undoubtedly changing.
We are seeing growing evidence that more and more buyers of various sorts are opting for attached dwellings. Buyer demand in locations where units dominate the dwelling mix - or are a significant part of the dwelling mix - has been rising notably for the past 12-18 months.
Suburbs where units prominent are now among the most powerful markets in Australia – which makes our Top 10 Apartment Hotspots report essential reading for investors seeking opportunities in 2024 and beyond.
Those seeking out well-located and affordable apartments include older people downsizing from a large family home.
They also include …
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young people seeking an affordable first step on the property ladder;
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lifestyle buyers seeking low-maintenance, lock-up-and-leave options in good locations;
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overseas migrants from countries where unit-style living is the norm;
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investors seeking affordability and higher rental yields in good locations; and
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buyers who seek the security and safety of an apartment above ground level.
In inner-city precincts in our biggest cities, houses can typically cost over $2 million, but apartments can be bought in the $600,000s and $700,000s in the same suburbs in many cases.
The rental yields are also significantly higher, a key consideration in times of higher interest rates – although it needs to be remembered that apartments do entail additional costs like body corporate fees.
But the most noteworthy data relates to capital growth. In a growing number of locations throughout Australia, apartments have recorded larger increases in median prices than houses, both in the past year and over the longer term.
At Surfers Paradise on the Gold Coast, apartments are considerably cheaper than houses, sell faster, have higher rental yields, have recorded bigger price growth in the past year – and the long-term capital growth rate also is superior.
There are many, many more examples like this across Australia.
New data from CoreLogic shows that apartment values are rising faster than those of houses in about six out of 10 suburbs.
This is also reflected in the general results for many of our major cities.
In the past three months, the median price for units in Brisbane rose 5.8 per cent, while houses increased 3.4 per cent.
Adelaide units outperformed houses by the same margin after increasing by 7.1 per cent during the same period.
Unit prices are also rising at a faster rate than houses across Sydney, Melbourne, Perth and Hobart, although they have fallen behind in Darwin and Canberra.
Across the combined capital cities, unit values rose faster than house values in 506 suburbs out of a total of 855 suburbs, with some unit markets gaining more than seven times more than houses.
