Why WA is bucking the national trend towards apartments
As interest rates continue to rise, some real estate experts expect an increase in apartment sales across Australia due to the large gap between the average house and unit prices.
The Reserve Bank last week increased its interest rate target by 50 basis points to 1.35 percent.
It also increased the interest rate on the exchange’s settlement balance by 50 basis points to 1.25 percent.
James Kirkland, director of sales for national real estate agency Upside Realty, told NCA NewsWire that buyers’ borrowing power is dwindling and it’s being felt across the property market.
Kirkland said he hopes the lifestyle apartments, which offer green space and amenities, will be seen as a viable alternative for those who can no longer afford a home.
“Since March 2020, the value of the capital city unit has increased 9.8 percent, compared to 24.7 percent for houses, which makes it a more affordable option for the community,” he said.
“The average price gap between homes and apartments has been widening for some time now and with the latest rate hikes, there will be buyers who will have to reevaluate their budgets.
“When looking at what they can get for their money, we expect to see a lot of apartments reconsider because in some cases they can get better value for their money.”
Kirkland says family-friendly suburban apartments are in high demand.
“Complexes that offer facilities such as swimming pools, gyms, cinema rooms and have lots of green open space and communal areas will be the most popular with buyers,” he said.
“This may mean to some that, in order to live in the suburbs of their choice, they may only need to consider an apartment now rather than a house.”
Mr Kirkland said the median house price in Australia’s combined capital cities was $937,101 while the average unit price for the equivalent was $643,795.
“But in many capital cities there is a much bigger gap, like in Sydney, where it costs you almost twice as much to buy a house as a single unit,” he said.
“House prices have grown six times faster than unit prices over the past two years.”
Mr Kirkland said the high cost of construction would also be a factor for potential buyers.
“When faced with a house that needs work versus an apartment with everything already taken care of, some buyers may not be prepared to risk too much for a renovation,” he says.
But it’s a different story in the west, where the property market is in stark contrast to the east coast during the pandemic.
Western Australian Institute of Real Estate President Damian Collins told NCA NewsWire there is no doubt that when prices rise and people are “feeling depressed”, they need to make choices about where to live.
“That’s why we’ve seen over the last five to 10 years, apartments make up more than half of all new construction in Sydney because property is so expensive,” he said.
“I think Perth is in the early stages of demand for much more apartments but we are still very affordable at the moment for homes. Our average price is the lowest of any major capital city.”
Mr Collins said for the people in the WA apartments it was more of a lifestyle choice than an affordability issue.
“In general in Perth, the apartment market has been driven by an inferior lifestyle and young people wanting that lockdown and leaving the lifestyle,” he said.
“When interest rates go up, we may see small changes, but I don’t think the cost of living and affordability will have a big impact on the apartment market, at least in the short term, because overall we remain very, very affordable.”
Mr Collins said while a rate hike could “squeeze” the market, most people would cope.
“Any rate hike will have some degree of dampening in the market; it’s just simple math,” he said.
“It’s going to affect what people can afford to buy, it’s going to affect what people spend elsewhere outside of their home loans.
“But what history has shown is that home mortgages in particular are one of the last things people cut – they’re going to cut lifestyles, they’re going to cut out vacations, they’re going to cut restaurants, they’re going to cut other things in life. .”
According to the big banks, many people are ahead of their payments, so they have a buffer.
Mr Collins said even if interest rates rose to five per cent, it shouldn’t be too much of a burden for most people, but he doubted it would be that high.
“I don’t think interest rates are going to go up nearly as high as some markets are expecting purely because that would have serious repercussions, especially now to the larger cities of Sydney and Melbourne, where their relative mortgage rates are much higher. , especially when compared to their income,” he said.
“Sure in the context of WA, yes, some people will get hurt. It will always happen. I think most people will be able to handle it. ”
M Collins notes WA is experiencing housing shortages and low rental vacancies.
“We don’t have enough houses to sell, the economy is very, very strong, demand is still there, population growth is now back from international migration, albeit slowly,” he said.
“I still believe that we will see moderate price growth this year, but also next year.”
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