Monday, October 17, 2011

Apartments Better Than Houses

A recent report from the Grattan Institute indicates a growing preference toward apartment-style accommodation in Australia.

The study, aptly entitled The Housing We'd Choose, found that Australians want more apartment-style housing and are moving away from detached housing.

It also found we’re not building enough of the type of accommodation more and more people want. ...

I’m concerned that there will be an oversupply of apartments in the Melbourne CBD and that this will create a severe price correction in that market, especially as many have been bought by investors. Some who won’t be able to settle their purchase and others who won’t be able to find tenants at a time when we have fewer overseas students coming to Australia.

An oversupply of CBD and new near city apartments is also looming in Brisbane.

But in general the high cost of land, council restrictions, the resistance of communities, high development costs and difficulty obtaining funding is stifling new apartment development in many of our inner- and middle-ring suburbs.

Then of course there are the infrastructure constraints to consider – namely public transport access and the capacity for existing roads and public facilities, such as schools and hospitals, to handle the type of rapid growth in resident numbers that higher density housing would create. ...

But as always, you can’t just buy any apartment and hope it makes a good investment.

I’d steer clear of generic, off-the-plan, and in particular, CBD stock. Inherently these lack scarcity and will be more risky in the next few years due to the glut of similar developments coming on line.

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