Chief economist encourages developers to maintain control of their pipelines
When reviewing sales data, luxury Sydney apartments experienced double the rate of growth over the last 10 years, denoting a shift in lifestyle preferences, according to a chief economist as she shared her insights on the outlook for the luxury apartment market in 2024.
As Aqualand’s $1 billion residential tower, AURA by Aqualand in North Sydney, is nearing completion, the developer approached Nerida Conisbee (pictured), chief economist of Ray White, to share her insights on the market.
Conisbee said median priced Sydney apartments increased in price by 42%, while apartments priced in the top 5% increased by 87%. “Perhaps the most fascinating contributing factor in the meteoric rise of luxury apartments, albeit only one of several, is the move away from Australia’s deeply ingrained preference for freestanding homes, for while luxury apartments outperform regular apartments, the same doesn’t hold true for luxury houses,” said Nerida.
“Over the past decade, house prices in the top 5% of the market have seen equivalent growth to those priced at the median, suggesting that it isn’t just a premium location that drives up the value of luxury homes.
“It also points to a slower preference shift with apartment living becoming far more popular over the past decade, across a wide range of demographics.”
Key factors driving the market
Conisbee said apartments in Sydney’s suburbs have outperformed houses in less expensive areas even at lower price points. She noted there’s a shortage of luxury Sydney apartments for sale, unexpectedly driven by a lack of properties for sale when in the past it was driven by the post-pandemic slowdown in demand. Among the factors that caused the shortage include a very low number of new developments with builders facing challenges in new projects being approved as well as in construction.
“A longer-term factor, however, are the changes to apartment living in Australia. Over a prolonged period, most apartments developed in Australia were aimed at younger people and designed to be rented or owned before buying a house,” said Conisbee. “Apartments were commonly seen as a compromise if a stand-alone house wasn’t affordable. Apartment living now, however, is deemed a far more attractive option, and often seen as preferable, across all age groups and income levels.
The chief economist said developers are the key to resolving the short supply issues in apartments, urging them to take action and “get projects out of the ground” to maintain confidence in the market.
“Developers who maintain end-to-end control of their pipelines, or have internal construction capabilities, will be well-placed to deliver quality projects to an undersupplied market,” said Conisbee.
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