By Mark Dawson | 25 Nov 2021

Locked down but not out: National Apartment Market on the improve in NSW, VIC; WA sales strong and QLD goes for gold.

5-second summary:

  • Locked in by lockdown fuels buyers desire for more space, better amenity and stability.
  • Gold Coast apartment sales soar, clearing between 42-56% of available inventory each quarter of 2021.
  • Brisbane pace of sales has almost doubled from levels being seen in 2020/21, since announcement of Brisbane 2032 Olympics.
  • Melbourne sales slow, while Sydney’s high housing prices have placed more focus on the apartment market and seen the rate of sales at the highest level since 2017.
  • Perth saw another solid quarter of sales as the market gears up from a strong summer of project launches.

Apartment sales: a Covid clearance

Nationally, the speed of sale of apartments illustrates that each city is operating in a different time zone when it comes to lifestyle, lockdowns and market activity. Markets weighed down by lockdowns will be buoyed by the encouraging results of those emerging and chasing the performance in states that have been able to operate with freedom and improving trading conditions.

Throughout 2021 Perth and the Gold Coast have continued to trade consistently and more strongly than in recent years with Perth projects selling an average of 16% of available inventory each quarter since the turn of the year.  Sales in the Gold Coast have been flying with projects clearing anywhere between 42% to 56% of available inventory each quarter this year. The Gold Coast’s enviable lifestyle is a key driver for both local and interstate buyers.

Brisbane has continued to pick up the pace on sales, progressing from 18% earlier in the year to 39% of available inventory clearing in the quarter.

While Melbourne tipped back into power save mode for lockdown, clearing 5% of available inventory, the jump achieved in Sydney to 15% signals that reopening the economy, workplaces and real estate market can drive greater activity once again, as it had started to upon reopening last year.

Urbis National Apartment Essentials Insights Q3 2021 - Available stock sold

Owner occupiers driving the market

We continue to see owner occupiers making up a larger share of demand, ranging from 55% (Inner -Brisbane) to 75% (Sydney) across all markets. Overseas buyers that were once a major driver of the apartment market have fallen from a peak of 29% in 2016 to only represent 5% of buyers in Q3 2021. This buyer pool has been significantly impacted by Covid induced restrictions on travel and inbound international students to Australia, along with foreign buyer taxes.

A major issue for the market when immigration resumes will be the amount of rental stock entering the market. The 35% of apartments sold to investors is the lowest level that has been recorded in the Urbis Apartment Essentials survey since it began in 2015. The increasing momentum from the BTR market will assist with rental stock; Urbis is now tracking 72 BTR projects (16,895 apartments) across Australia that are either proposed or built.

Urbis National Apartment Essentials Insights Q3 2021 - Purchaser profile

Greater lifestyle benefits attract apartment purchasers

In the year to Q3 2021, the shift to larger apartment types has continued, with 27% of apartments having 3 bedrooms or more, 55% with 2 bedrooms and 18% being either one bedroom or studio apartments. This is the highest level of three bedroom or larger apartments that has been recorded in the Urbis Apartment Essentials survey since it began in 2015.

This flips the pre-pandemic result of Q3 2019 where 15% of apartments sold had 3 bedrooms or more, 53% had 2 bedrooms and 33% had one bedroom or were a studio.

In addition to type, the actual size of each apartment type has been creeping up too, with the average 2-bedroom 2 bathroom increasing from 86 sqm to 91 sqm in the year to Q3 2021 and a 3-bedroom 2 bathroom increasing from 127 sqm to 134 sqm. This increase in apartment sizes is being driven by the owner occupiers who are wanting larger apartments and less of a focus on central city locations.

At this stage the supply over the next three years is forecast be at lower levels than has been seen in 2021.

Future Pipeline

Nationally, the pipeline of completions has trended down in 2021, most noticeably in Sydney and Melbourne. There are signs that the pipeline, while lower overall in the short term, will start to pick up as Sydney and Melbourne are unlocked and the Gold Coast, Brisbane and Perth markets continue to sell through current inventory.

It is likely supply will need to be mobilised quickly to deal with the effects of increased immigration as border restrictions continue to be eroded.  This is especially the case following a four-year period where the volume of launches, approvals and applications has been trending down across the country.

This year there are expected to be 9,732 fewer apartments less completed than in 2020 and 19,698 fewer than when the market peaked in 2018. At this stage the supply over the next three years is forecast be at lower levels than has been seen in 2021. Rising pressure on construction costs is going to be one factor that limits supply going forward. However, as migration comes back and population growth picks up it will be important that supply increases.

Urbis National Apartment Essentials Insights Q3 2021 - Apartment Approvals

Market Outlook

  • Trading conditions remain strong in the Gold Coast, with strong demand and limited supply
  • Brisbane is backed by the Olympic boost and having fared relatively well from the Pandemic looks set to continue solid sales momentum in existing projects
  • Sydney is showing signs of post lockdown recovery and house prices putting pressure on affordability and tighter lending restrictions, apartments will be an attractive option for many in the market
  • Melbourne may follow Sydney in improving conditions coming out of lockdown, and the prospect that international borders reopening can begin to reinvigorate the inner-city market
  • Investor activity will be needed to boost volume in the major capital cities albeit with the risk of being constrained by tightening lending criteria on the horizon
  • Demand continues to be strong in the Perth market. However, large increases in construction costs are making viability of development more challenging

Contact our expert team to find out more.

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