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  • What’s behind the growth in apartment sales?

    What’s behind the growth in apartment sales?

    The Australian property market is making headlines for all sorts of reasons as the impact of record low interest rates is felt differently across various parts of the nation.

    Growth in apartment sales

    Generally speaking, apartments tend to be more affordable because they are simply smaller areas and this opens them up to a larger range of buyers, especially first time buyers who look for the price points of entry into the market. When considering the affordability of inner city living, buyers need to understand how the simple forces of supply and demand drive property values.

    The national median value of apartments has grown 7.9% over the year, yet slowed to just 4% over the past three months. Although actual volume of apartment sales has increased, the over-supply of new development product presents buyers with greater choice.

    The cosmopolitan lifestyle that pervades within our inner urban areas across food, culture and entertainment continues to cross-pollinate with the infusion of new communities. However, as our reclaimed neighbourhoods become popular with new arrivals, typical resident opposition or a sense of ‘not in my backyard’ combined with strict planning controls, influence how these areas continue to develop.

    Market wrap: interest rates

    As the RBA moved to lower the cost of borrowing for Aussie home buyers, the latest standard variable rate of 5.45% released by the RBA means that the cost of home borrowing is now at an all-time record low since July 1968 - almost 47 years ago as Mick Jagger belted out Jumpin’ Jack Flash to number one on the Aussie charts! Admittedly, this does not include the extra associated costs of living in today’s world.

    Market wrap: Sydney

    At the same time, Sydney median house prices have crashed through the magic million-dollar mark ($1,000,616) reflecting a 22.9% increase in 12 months, now making Sydney more expensive than London.

    It’s been the investors instead of home buyers who have accounted for 62% of all property purchased in Sydney over the past four months, potentially squeezing out first home buyers, as the whole affordability issue in Sydney has never been more topical. Sydney apartment values have also surged by 13.9% over the past year and are only roughly $45,000 less expensive to buy than the average national cost of a house.

    Market wrap: Other Capital Cities

    Melbourne continues solid growth posting 10.3% median property value growth, with apartments recording a modest 4.5% growth over the past 12 months. Canberra homes have increased 5.4% whilst the apartment market has weakened with median prices slipping by 6.8% over the same 12 month period. Affordability in Brisbane and Adelaide remains good whilst Perth reflects the opposite of the Sydney experience, presenting a more affordable option with median house prices actually falling by 1.4% over the past year, fuelled by lower interest rates plus a fall in the local mining and resource industries.

    Source: Reserve Bank of Australia, July 2015. Domain House Price Report, June 2015. ABS Monthly Home Loan Report (May 2015).

     

    About the author

    • Andrew Wilson

      Dr. Andrew Wilson, Senior Economist for Fairfax-owned Australian Property Monitors and Domain.com.au is our numbers man on The Great Australian Dream. As a leading commentator on the Australian property market, specialising in housing market analysis, Andrew has a strong following with weekly columns in the Sydney Morning Herald and Melbourne Age.

      Throughout the series, Andrew will help home buyers understand what the numbers really mean and reveal the forces driving the Australian property market whilst breaking down the jargon along the way. Dr Andrew Wilson has previously held senior property and construction research positions within industry, academia and government as well as holding a PhD and Masters in Research in Housing Market Economics.

      Andrew Wilson
     

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  • Disclaimer:

    The information here is of a general nature only and is not intended to constitute financial or tax advice. You should consult your professional adviser, accountant or taxation expert for advice specific to your personal circumstances.