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The mass production of “inferior units” means that anyone who has bought an apartment over the last two decades should consider cutting their losses before prices fall even further, according to an analyst at Propertyology.
The group’s research suggests that even during the periods of strong market conditions, unit price growth significantly underperformed houses, including prices falling below 2014 levels in three capital cities.
Head of research Simon Pressley says the Australian construction industry is “critically ill”.
“If you’re the owner of an apartment within a medium- to high-density building that was constructed within the past 20 years, you’ve contracted Australian real estate’s equivalent of the bubonic plague,” he adds.
“There’s no vaccine for this horrible disease and the best treatment is most likely to sell sooner rather than later.”
Pressley blames the “same-same, mass produced Lego buildings”, alongside the governance of the construction industry, poor quality workmanship and the fact that 40% of the purchase price of a new property represents assorted taxes.
Propertyology’s research shows the differential between median house price and median apartment price growth in Australia’s biggest cities was between 20% to 30% in the five years to April this year. Pressley expects this to continue to widen for an indefinite period of time.
“What this means going forward is that if the median house price within a specific location increases by, say, 20% over a five-year period, the value of an apartment is likely to decline,” Pressley says.
“In fact, for the owner of a medium- to high-density apartment to achieve even a modest amount of growth in asset value, their local market would need to produce a property boom – and such a possibility currently seems many years off for most Australian capital cities.”
Owners of these apartments may also be left with repair bills due to extreme structural integrity concerns – a problem which has been highlighted in the news in recent months with apartment buildings in Sydney.
Pressley says Australia’s 25 million population is housed within 10 million dwellings, with the sector now in the middle of the second period this century where the total national volume of new housing supply exceeds base-level demand or population growth.
Over the 16 years to December 2018, Australia added 1,005,786 ‘attached dwellings’ within just eight capital cities, according to the Australian Bureau of Statistics.
The data shows that 10% of Australia’s total dwelling stock is now medium- to high-density apartments with the bulk of that built in Sydney and Melbourne since the turn of this century.
But Pressley says apartments will continue to play an important role within Australia’s housing supply. Higher density residential development reduces pressure on the national infrastructure budget, reduces commute times, and provides the community with a more affordable option to live centrally, he says.
The Propertyology research found that Sydney (65.7%), Canberra (62.9%) and Darwin (51.2%) have constructed more apartments than houses over the past 16 years.
The cities with the next highest ratio of new apartments to new houses were Wollongong and Gold Coast (both 48%) followed by Melbourne and Brisbane (44% each), while the NSW Central Coast had 41%.
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