Apartments may usurp houses as growth gap narrows: McGrath

Apartments may usurp houses as growth gap narrows: McGrath
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

Greenland Centre

115-119 Bathurst Street, Sydney

249 metres

Infinity Tower

43 Herschel Street, Brisbane

254 metres

Prima Pearl

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

House Prices Residential Market

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