Apartment Revolution in Real Estate

At Hotspotting we’re always on the alert for evidence of CHANGE that will influence property markets.

The great potential in residential real estate is that change is always happening, opening up new possibilities for growth.

One of our catch-cries at Hotspotting is that THE PAST DOES NOT INFORM THE FUTURE.

Poor performers of the recent past can become the nation’s leaders of the near future.

One of the biggest trends we are tracking, under the general theme of change, is the rise and rise of apartments – challenging the dominant paradigm of real estate.

That paradigm, still widely accepted in the real estate industry, states that houses always outperform units and townhouses on capital growth.

But that is undoubtedly changing.

We are seeing growing evidence that more and more buyers of various sorts are opting for attached dwellings – be they units, townhouses or apartments.

Buyer demand in locations where units dominant the dwelling mix - or are a significant part of the dwelling mix - has been rising notably for the past 12 months.

Suburbs where units dominate the dwelling mix are now among the most powerful markets in Australia – which makes our Top 10 Apartment Hotspots report essential reading for investors seeking opportunities in 2024.

Those seeking out well-located and affordable apartments include older people downsizing from a large family home.

They also include …

young people seeking an affordable first step on the property ladder; 

lifestyle buyers seeking low-maintenance, lock-up-and-leave options in good locations;

overseas migrants from countries where unit-style living is the norm; and 

investors seeking affordability and higher rental yields in good locations.

In inner-city precincts in our biggest cities, houses can typically cost over $2 million, but apartments can be bought in the $600,000s and $700,000s in the same suburbs in many cases.

The rental yields are also significantly higher, a key consideration in times of higher interest rates – although it needs to be remembered that apartments do entail additional costs like body corporate fees.

But the most noteworthy data relates to capital growth. In a growing number of locations throughout Australia, apartments have recorded larger increases in median prices than houses, both in the past year and over the longer term.

At Southport on the Gold Coast, apartments are considerably cheaper than houses, sell faster, have higher rental yields, have recorded bigger price growth in the past year – and the long-term capital growth rate is close to 10% per year.

There are many, many more examples like this across Australia.

So there is a significant list of good reasons why apartments are attracting growing demand from a range of buyers.

And that means that the dominant paradigm of real estate is looking decidedly shakey.