Jordan Curran observed in an earlier post that enquiry data shows increased demand for 3-bedroom units. How does this reconcile with the need for more family-sized apartments and affordability?
The question is really who is looking to buy these units?
👴🏻Being in the middle of the Baby Boomer retirement wave, the current market for 3-bedroom apartments is mostly older downsizers. These units are designed and marketed for the premium end, with buyers tending to be relatively well-heeled homeowners trading out of multi-million-dollar homes into an apartment. They want three bedrooms for functionality – one acts as a workspace, one for the grandkids to stay over.
💰Owners of a $2.5m+ home in a good suburb will comfortably pay ~$2m for an apartment, with the balance going to fund their retirement (tax free), or towards the bank of mum and dad. They want the lock up, lower-maintenance lifestyle apartment living can provide and are prepared to pay for it.
👨👩👧👦Their homes will in turn usually sell to a similarly well-heeled younger family which wants the space offered in a larger, detached home. This is a net positive.
(Downsizers from less salubrious homes are more inclined to downsize to a smaller, 1 or 2-bedroom unit, albeit on the larger size than those targeted at investors).
➗It remains that a tiny fraction of new 3-bedroom apartments being marketed and sold will be sought out or purchased by young families, particularly at the entry level.
For reasons set out earlier, the necessary price point is unobtainable for families with two parents earning the median wage who can afford just over $1.0m on a dwelling. They are also extremely unlikely to select apartment living over a house where the house can be obtained for a lower price:
🏠 Brisbane/Melbourne median house price ~$940k vs $1.3m+ for a moderately sized 3-bedroom apartment; 🏠 Sydney median house price ~$1.3m vs 2.0m+ apartment.
I'm not against large apartments, or the concept of apartment living in general – they are a valuable contribution to the overall housing mix and should be encouraged to the extent the market will accept and the public can afford them. It's just that they cannot be looked at as an "affordable" housing product for a vast majority of Australians.
Thus, I return to the need to facilitate more suitably priced, suitably configured dwellings in areas which can meet more moderate price points – namely house & land and middle-ring townhouses.