new apartment to be lower than building a new detached home or townhouse.
That's how it works in many parts of the world, such as the USA. Angie Zigomanis has shared a comparison of building costs across the US where building a square foot of unit is indeed lower than a square foot of detached house.
Factor in (generally) lower land cost due to higher density and apartments start to make sense for more buyers.
It's the relatively affordable price point compared with houses, plus some positive trade offs for amenity and access, which makes denser housing compelling in such markets.
Yet, we have the opposite in Australia. The cost of developing mid-high rise apartments is (much) higher for each square metre of living space than lower-density alternatives. A reduced land component is not enough to offset other costs. Nor do these costs consider design requirements which are also higher.
The result: the price of a new apartment is substantially higher than a comparable detached home in greenfields or a middle ring townhouse.
It would be irrational for most buyers, particularly with price constraints, to select an apartment compared to other typologies. There is only so much a home buyer can/will trade off amenity for space, particularly when new 1 bedroom units are approaching the cost of 3 bedroom townhouses or detched homes.
This is why the market remains heavily skewed to larger, downsizer apartments. This cohort has the equity to buy good quality and relatively large units in high-amenity areas – not something the bulk of new homebuyers get to choose.
Price point is the number 1 reason most buyers will choose to buy an apartment. So unless we can significantly curb the cost of development, apartments will remain a small proportion of future housing supply.
I've previously discussed the barriers to reducing costs, including: • inflated labour prices due to government infrastructure investment • productivity issues • systemic delays • growing taxes and charges • fewer builders • increasing insurance requirements & costs • more stringent design and regulatory requirements
Yet I have not heard any discussion from State or Federal Governments about tackling any of these. Getting a planning permit a few months faster in activity centres doesn't bridge this gap.
❓Faced with this evidence, what would be a more useful response to increasing housing supply?