According to Oxford Economics Australiaattached dwelling starts (apartments, townhouses & semi-detached) will grow from 60,728 annualised in March QTR 2024 to 109,573 by June QTR 2029.
Just 54,921 multi-res starts are expected for the whole of FY2025; I would not be surprised if this ended up lower.
The current figures represent a low base which will certainly improve – eventually. Will starts double over 5 years? I’m not convinced.
Why? The cost of delivering new multi-residential projects, especially apartments, only continues to increase. These costs are rising faster than underlying values which demands higher end prices, further defeating viability.
The gap between the cost of buying an existing apartment vs a brand–new equivalent has never been higher. Off the plan apartment sales remain a fraction of where they once were, and are concentracted in higher-end, boutique projects.
With a substantial cost penalty and without stamp duty incentives, what is the thesis for expecting buyers for these new dwellings en-masse which developers will need to start building them?
The larger-scale apartment projects needed to hit these commencement figures will not become #feasible at scale unless: ✅Taxes are reduced to favour this types of development ✅Both local and foreign investors are re-encouraged to invest and underpin these projects from a funding perspective ✅Substantial planning changes are brought in to speed up time and reduce costs – less regulation, not more ✅Underlying prices grow substantially to reduce the gap between new dwellings and established dwellings
🤔Demand for apartments from local buyers will remain subdued compared to other housing types as long as the price of a new apartments is substantially more costly than the prevailing established dwelling price, or a comparable new townhouse or detached home.