April 28, 2021 by Dymphna

Apartments have never been this cheap. Why?

Do buyers like apartments, or do they just like a bargain?

Apartments are cheap.

We all know that. Apartments are cheaper than houses.

But right now, they’re cheaper than they’ve ever been. Apparently the median apartment is now 66% cheaper than the median house – the largest differential on record.

That’s the word from Domain anyway:

With the median unit price now 66 per cent lower than the median house price – the biggest difference since Domain figures began – many more house-hunters are considering apartment life.

… The most recent Domain House Report found the Sydney median house price had reached $1,211,488, up 6.7 per cent over 2020 to hit the record high. In comparison, apartment prices have been lagging, and have actually fallen $20,000 from the onset of the pandemic in March 2020, to a median of $729,840. 

Domain senior research analyst Nicola Powell said the fall was largely a result of weaker investor activity as a result of COVID-19 border closures preventing migrants and overseas students from coming in to take up apartments, as well as many tenants quitting because of market uncertainty.  

I think that’s all on the money. Without new immigrants and without international students, inner-city high-rise apartments have been struggling. Both rents and prices have been falling markedly.

But Domain thinks things are looking up, with greater affordability helping drive owner-occupiers into the apartment market.

… Stuart Penklis, head of residential at developer Mirvac… says there’s now a discernible shift in owner-occupiers and families choosing apartments.

“Before, people aspired to live in a free-standing house but everything has changed in the past 12 months,” he says. “Affordability of houses has significantly diminished and high-quality, larger apartments have become a good-value proposition…

“In addition, people are increasingly looking for something that will give them a good lifestyle in connected and well-serviced communities that have a lot of amenity on the doorstep. We’ve seen this change happening across the country, and particularly on the eastern seaboard, and I think the advent of COVID accelerated the change, too.”

Yeah, gee, I don’t know.

I think you have to keep your guard up when a developer of high rise apartments starts talking about the attractiveness of high-rise apartments.

And I’m just not sure it’s true anyway.

I think most people – almost everyone – would choose a detached home in the right area at the right price, over an apartment.

The price is really what apartments have going for them.

And we’re just not seeing it in the data. CoreLogic sales figures show a near record high demand for houses, whereas demand for units is relatively depressed:

So I’m not sure I’m buying it.

I’m still wary of the high-rise apartment segment, because there’s just so little you can do with the property once you own it. You’re options are limited and it’s hard to differentiate yourself in the market.

Still, a bargains a bargain, and I am hearing of sales going through at fire-sale prices.

So maybe there’s good money for the brave and hungry here.

But don’t take a developers word for it.