Apartments may usurp houses as growth gap narrows: McGrath
House prices in Australia have outperformed apartments by a significant margin for long-term capital gain but the growth gap is narrowing, reflecting the increasing social acceptance of apartment living as demographic trends shift, according to John McGrath in a recent Switzer blog.
The claim is well supported by facts. House prices in Sydney rose by 11.5% in 2015 with apartments trailing by just a touch at 11.3%, according to RP Data. Across the five prime capital cities (Sydney, Melbourne, Brisbane/Gold Coast, Adelaide and Perth), growth was exactly 8% for both property types.
Apartments are clearly not the poor cousin of houses when it comes to returns and part of the reason is that apartment living is becoming the preferred choice for a growing proportion of the population, he writes.
In fact, there’s a good chance apartments may replace the quarter-acre block as the new Australian dream because many are in localities that are close to work and social activities and come with perks such as gyms, pools and concierges, argues McGrath.
Changing demographics are also driving this trend. While the nuclear family is still dominant, an increasing number of Australians live in a couple relationship without children or by themselves – and neither need or want to live in a house.
By around 2030, childless couples (DINKS and Empty-Nesters) will become the most common family type in Australia – and lone person households (SINKS and older people) will become the fastest growing household type, according to the ABS.
Adding to this is increasing interest in apartments from investors due to affordability, as well as rising international demand. Foreign Investment Review Board (FIRB) restrictions mean overseas investors can only purchase new stock – typically apartments.
Apartment living is on the rise around the world – literally.
In McGrath’s annual report, the tallest residential towers both in Australia and overseas were profiled. Many of them here at home are still in development with one of the highest, Australia 108 in Melbourne offering ‘cloud residences’ from Floor 71 up. The tallest residential tower in Sydney, Greenland Centre on Bathurst Street, is also currently under construction.
In conclusion, McGrath predicts that there will be larger apartments for young families, offering a home within a 20 minute radius of everything they need, such as schools, shops, jobs and transport.
Tallest residential towers – Australia
235 metres
115-119 Bathurst Street, Sydney
249 metres
Infinity Tower
43 Herschel Street, Brisbane
254 metres
35 Queensbridge Street, South Bank, Melbourne
265 metres
120 Collins Street, Melbourne
297 metres
Eureka Tower
Riverside Quay, South Bank, Melbourne
319 metres
Australia 108
70 Southbank Boulevard, Melbourne
323 metres
Q1, 9 Hamilton Avenue, Surfers Paradise, Gold Coast
Tallest residential towers – International
339 metres
Mercury City
1st Krasnogvardeysky Avenue, Moscow, Russia
380 metres
Elite Residence
Al Sofouh Road, Dubai, UAE
382 metres
Burj Mohammed Bin Rashid
Khalifa, Bin Zayed The 1st, Abu Dhabi, UAE
393 metres
23 Marina
568 Al Marsa, Dubai Marina, UAE
414 metres
Princess Tower
Al Marsa, Dubai Marina, UAE
426 metres
432 Park Avenue, New York, USA
632 metres
Shanghai Tower
Luijiazui Finance and Trade Zone, Pudong District, Shanghai, China
828 metres
Burj Khalifa
1 Sheikh Mohammed bin Rashid Blvd, Dubai, UAE
*Source: Household and Family Projections 2011 to 2036 (series II), released March 2015