Have Australia’s apartment residents finally had enough of strata living and are they now fleeing back to houses? Do they see high rises as high risk for too many varied but valid reasons?
It seems post-Covid property prices have taken an unexpected twist, with Sydney and Melbourne house prices soaring but apartment prices flat-lining, if not actually falling.
And, according to a report in the Sydney Morning Herald last week, the record-level disparity between median prices for houses and apartments, currently tracking at 66 percent in Sydney, is the result of the pandemic depressing the latter and boosting the former.
It’s a similar story in Melbourne where the difference is 64 percent, according to this report, also in the SMH. Apartment prices are rising in Melbourne but by nothing like the boom in house prices there.
Historically, house and apartment prices generally rise and fall at the same time by roughly the same proportions, the gap remaining more or less the same, tracking at a little over 50 per cent, or thereabouts.
But, as also discussed in this week’s Flat Chat Wrap Podcast, a whole new set of factors has created the largest divide seen in many, many years.
“Over the past three decades it is rare that house and unit prices move in opposite directions annually,” says Domain’s senior research analyst, Dr Nicola Powell, in the SMH article.
She explains that reduced investor activity has affected apartment more, because they are preferred by investors. And lifestyle changes due to people having to work from home so needing more space, and a demand for better value for money, have seen people move out of the city centre areas where prices are higher and apartments are more prevalent.
And there may be more to it, as we discuss in the Flat Chat Wrap podcast. Certainly the absence of overseas students, who prefer to rent apartments, the closure of borders to international business travellers, the cratering demand for short-term holiday lets in the cities, and the consequential slump in residential rents as former holiday lets flood back into the market, have all contributed to the brake on apartment prices.
At the same time, it’s worth noting, median house prices have been rising and are already higher than pre-pandemic levels.
However, as we discuss on the Flat Chat Wrap podcast, an accumulation of other negative influences may mean Sydney is falling out of love with apartments.
Certainly the forced acceptance of tele-working, means you don’t need to live in or near city centres. All you need is a decent internet connection.
Add to that, lingering concerns about flammable cladding, defective buildings and the simple fact that some of us don’t want to spend too much time too close to strangers when there’s a virus that could break out again, at any time, and you can see why home buyers are fleeing apartments.
Pessimists will see this as a long-overdue reality check for apartments. Optimists will view this as a golden opportunity to snap up some high-rise bargains.
You can read the Domain House Price Report in full on that link.