Whether we consider apartments from the view point of tenant, owner occupier, investor or property developer, it is clear that the development of medium-high density housing offers broad appeal and is an effective way to curb the housing shortage in Australia.
But, will this trend continue? Has apartment development slowed and what can we expect in terms of property finance?
Erik Bigalk speaks with leading property finance expert Robert Projeski, founder and managing director of Australian Mortgage Options (AMO), taking a look at the forces that drive unit/apartment market trends and what we can expect into the future.
Demand for Australian Property
Despite the ongoing global economic uncertainity, the Australian property market has continued to attract national and overseas investment and remains relatively stable compared to overseas markets.
With speculative development in Australia slowing in the wake of the GFC, it has had the effect of reducing vacancy rates, while simultaneously driving demand and rental values up. With available housing already falling short and population growth likely to increase drastically over the coming years, we are looking toward a future promising a lift in yield returns and capital growth.
Property is still in High Demand
Additionally, the recent reductions of the cash rate by the RBA has allowed property buyers to breathe a sigh of relief, sparking an increase of activity in the housing market.
And despite local factors such as higher labour rates and increased costs of materials – looking at the numbers of units under way, there are developers striving to meet the renewed demand for medium-high density housing, he added.
According to Projeski, there is a fair bit of new stock being built, sold off-the-plan and coming available over the coming months. He sees this as a strong indicator of increased consumer confidence and positive sentiment in the market.
Population Growth
Going by the ABS, our nations populous is expected to grow to over 30 million by the year 2056, based on current birth rates minus deaths plus migration, the latter of which makes up over 50% of the annual population growth. With Melbourne’s population expected to double to 7.5 million over the next 40 years (ABS), it is not surprising that the Victorian capital leads in terms of apartment development across our main population centres, where most of our population growth is poised to take place.
Projeski went on to say, while inner city Sydney has always enjoyed strong demand from owner occupiers and investors alike, projects in areas with obvious housing shortage and good access to shopping, transport, and schools have been few.