Affordability, demographics drive apartments’ popularity

Affordability, demographics drive apartments’ popularity

21 April 2017 by Shane Kempton 0 comments

A major trend in the Australian property market in recent years has been the growing popularity of apartment living.

In the December 2016 quarter, the number of new apartments completed outnumber houses for the first time – 28,527 new units compared to 28,102 new houses.

The growing love affair with apartment living is driven by is being two key factors – affordability and demographics.

For many young property buyers, flats are an affordable entry point into the property market, especially in the boom markets of Sydney and Melbourne.

Renting an apartment is also more affordable than renting a house, and this economic reality has resulted in a growing number of property investors buying off-the-plan units because they know there will be a strong rental demand.

Demographic changes are also driving the growing popularity of apartments. For instance, there has been a rise of people living alone, while the overall sizes of households are getting smaller.

At the same time, the ageing population is resulting in a surge of Baby Boomers and empty-nesters selling their large family homes and downsizing to an apartment, using the profits to fund their retirement.

These affordability and demographic factors have resulted in apartment living growing in areas that previously showed resistance to this style of living. For many years, homes with large backyards dominated the Perth property market. This is now rapidly changing, with apartment developments expanding beyond the CBD to the outer suburbs such as Joondalup, Clarkson, Midland, Armadale and Rockingham.

Buying an apartment can be a great lifestyle choice and can achieve significant capital growth, providing the buyer undertakes research by avoiding the following pitfalls: 

  • Buying an apartment in a location that is not attractive to tenants i.e. not close to amenities such as shops or transport;
  • Not checking the track record of the developer to ensure they will deliver what they are promising in terms of quality and completion time;
  • Buying in an area where a large number of apartments are under construction. An oversupply of units in a particular area can lead to depressed property prices until the excess supply is soaked up by the market;
  • Selecting an apartment based up advice of friends or family rather than seeking independent information;
  • Not properly checking the actual size of the apartment. When buying an apartment, you are paying for the actual square metre so every square metre has a value;
  • Deciding to buy an apartment close to your home instead of looking at investment opportunities throughout the metropolitan area;
  • Buying an older apartment that drains your finances through maintenance costs;
  • Selecting a complex with many investor owners. The greater the number of owner-occupiers in the complex, the more likely the complex will be well maintained;
  • Not undertaking a full assessment of the true cost of buying and holding the property. For example, if the property is an apartment, there are additional costs as strata fees. Purchasing an apartment with high strata fees will eat into your cash flow; and
  • Buying an apartment with the view to a quick return rather than viewing it as a long-term investment and stepping ladder to purchasing a portfolio of properties that will fund your retirement.

Shane Kempton is the chief executive of Professionals Real Estate. He is an experienced, well-respected real estate identity and chief executive committed to effective development of teams. His reputation is built on honesty, integrity, confidentiality and ethics, all highly valued traits of this influential leader.

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