Aussies still prefer houses to apartments, but is that set to change?

Demand for detached dwellings continues to rise in Australia, with new data showing the proportion of houses sold over the year climbing to new heights. 

According to property research firm CoreLogic, an estimated 459,308 properties were transacted in the twelve months to January 2021, with house sales making up 74 per cent of that number.

Driving the increase in sales volumes is the government’s HomeBuilder scheme, which has boosted property sales by more than 100 per cent compared to the previous year, according to the Housing Industry Association.

Since the program was introduced in June, however, takeup has been largely limited to standalone houses, which require buyers to jump through fewer hoops than off the plan units.

CoreLogic head of residential research, Eliza Owen said the scheme’s design doesn’t favour new units, pointing to the “tight deadlines for eligibility, where the commencement of a new property initially had to take place within three months of the contract date.”

Apartment glut likely to persist

The apartment market has also been weighed down by a lack of investor confidence. Corelogic notes that in 2020, investment loans averaged $5.1 billion per month -- 22.7 per cent less than the monthly average over the past decade.

“The relatively low levels of investment activity may have been compounded by weak rental markets, particularly in highly-concentrated investment markets like inner-city Sydney and Melbourne, which are largely comprised of unit stock,” said Owen.

Andrew Wilson, chief economist at Archistar said the inner-city apartment glut is likely to persist into the foreseeable future, with the unwinding of bank and government support expected to add to the market’s challenges.

“And there is certainly no prospect of a sharp improvement in demand anytime soon that will push vacancy rates downwards and offset falling rents - particularly with international borders remaining closed and the spectre of ongoing local lockdowns,” he said.

Changing attitudes towards high-density apartments have also affected demand. With many Australians now working remotely, the space provided by detached dwellings has become much more desirable than cramped apartment quarters.

However, Owen notes that rising house prices and the end of the HomeBuilder scheme could see both investors and owner occupiers return to the apartment market, where the barriers to entry are generally lower.

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