“An apartment construction boom shows just how much Aussies love apartments now.”
Really? ‘Love’ is a strong word.
If you look at where new property is being built right now, it seems to tell you that this is the dawn of the age of apartments.
A lot of people say this is because there’s been a seismic shift in the Australian psyche. We’ve swapped lawnmowers for lattes and we’re all about the funky inner-city lifestyle now. There’s been a “profound a cultural shift”.
Me, I’m not so sure. Maybe I’m just a simple country girl, but when people start telling me that we’ve turned our backs on leafy quarter acre blocks, to live in small boxes in areas where it’s impossible to find a car park, my BS detectors start going off.
It is true that apartments are in the ascendancy. If you look at the latest building approvals data, we approved as many units (blue) as detached houses (green) last month – for the first time in history.
Things are definitely changing. And there is a definitely boom in apartment construction right now. Keep in mind that this is just approvals, and not all approvals become actual buildings, but still, if the last six months worth of growth is repeated, we’re looking at an annual unit growth rate of 40%!
That’s huge.
And it’s quickly becoming an Australian wide phenomenon. The strong growth in unit approvals last month was almost entirely driven by Queensland. But over Christmas it was New South Wales, and in October and November it was Victoria.
Now, units are on the rise in every state and territory. This chart here follows the share of building approvals that are detached houses, rather than units. Since 2010 there been a clear shift towards units in every state.
And NSW broke through the 50:50 mark in 2011. Remember that’s all of NSW so in Sydney itself it’s probably much higher.
In QLD and Victoria, units currently make up about 45% of new approvals, but it wouldn’t surprise me if we were well past 50% in the capitals.
So this is the new reality. High-rises are on the rise. And from here on, you’d have to think that the balance of Australian housing is only going to tip further towards units.
By international standards, our cities aren’t that ‘dense’. Most major cities pack more people in to much smaller areas.
So there’s plenty of upside.
But is it because we ‘love’ apartment living?
Our new found love affair with inner-city living was a narrative that emerged in the late nineties and early naughties. We were all ‘Sex in the City’ wannabes.
And there was some sort of cultural shift. For sure there was. There was a generation of couples that just decided to push child-rearing back 10 years. Spent a bit longer building a refined appreciation of coffee and live music. Spent a bit longer working on their career/social life/beard.
There was a worrying drop in fertility rates around this point. People freaked out. The government brought in the baby-bonus. Peter Costello urged us to take one for team Australia.
But it turns out that all that worry was unnecessary. Turns out that the kids were just taking the single-life boat out a little longer than their parents. They hadn’t decided to not have kids, only to have kids a little later.
Fertility rates bounced back.
But the return in fertility rates didn’t unwind the narrative that we loved our inner cities.
But for me that didn’t add up. If the generalisation used to be that you moved out to the suburbs to raise children (where there is actually room for them to swing a cat/cricket bat), why had that changed?
(A friend of mine is a stay at home mum, with two kids under 4. She says her fourth floor apartment feels like a small prison sometimes. Or was it insane asylum?)
My theory is that it’s not about lifestyle. It’s all about economics.
Constipated land release programs have made land on the fringes very expensive. Take Sydney for example. The average price for a new residential lot increased by 20% in 2014 – more than the average house.
New lots now cost $390,000 on average. Add a basic house and your easily within striking distance of $600,000.
But that’s just the dollar cost. Fringe land in Sydney can be a long, long way out. So there can potentially be a huge opportunity cost associated with living a long way away from the city or the places you work.
If you’re adding 2+ hours everyday in commuting, that’s 10+ hours a week – that’s a full work day lost to travel.
Suddenly giving up a yard and living in the city seems a lot more attractive.
So I think this is what’s driving the trend towards apartment living. It’s not that we love apartments. We just love where they are and how much they cost.
And until we decentralise work, and drive employment centres further away from the CBD, this isn’t going to change.
The age of apartments has only begun.