Let me get straight to the point. Whilst there is a clear and valid focus on the extraordinary demand evident across the residential housing market, I think it important to highlight we are seeing a different level of demand for apartments. There is a two-speed market in place across Sydney right now and that does have consequences.
It’s like right now everybody wants a house. Not just a home….they want a house. Perhaps it’s a response to the reality of living through COVID lockdown in an enclosed space, or maybe it’s a response to limitations on holidays and overseas travel but the difference we are seeing between the level of demand for homes and that for apartments is more extreme than I have seen in a long time.
According to CoreLogic, home values have increased by 4.4% over the last three months. That’s three times higher than the growth achieved for units of 1.4% for the same period.
So, what does that mean?
I think we are seeing the aspirational homeowner/occupier fuelling demand. Potential purchasers are really pushing to secure their dream home. And for aspirational purchasers, their dream home is not automatically an apartment.
It means vendors of apartments need to be mindful when setting their expectations of value. It is tempting to believe that market demand is uniform and in light of the extensive positive commentary to therefore expect a price premium. In reality, the pace of growth for apartments is solid but definitely not as extreme as we are seeing for houses.
But. I want to stress and reassure property owners that demand for apartments will follow that of houses. I expect to see continued value growth for apartments because the reality of affordability will mean many aspirational home buyers, especially those who want to live in or near the city, do revise their expectations in order to achieve ownership.
So, the upshot is whilst it is a two-speed market both are heading in a very exciting direction.