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Luxury unit market to climb as corporate landlords enter residential market

Business

The luxury apartment market was likely to be the sector where prices soared in 2024 but so too was the entry of the corporate landlord in residential housing, according to Ray White economist Nerida Conisbee.

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Significant changes occurred in the property market this year and some of them were likely to continue in 2024.

Conisbee said one of them would be who owned the rental properties as Australian and global institutional owners of property were looking to residential markets as an investment of choice.

“Spanning “build to rent”, retirement living, aged care and land lease, the “living” sectors are hot property, driven by a shortage of homes and population growth.

“In the next 12 months and beyond, your landlord may be the company that previously owned the office building you worked in or the shopping centre you visited on the weekend.”

She said beach houses, which were in vogue during Covid, were now in less demand and some areas had seen sharp falls in prices as interest rates made it much more expensive to own a holiday home.

The return of travel has also impacted this area of the market, as had increasing restrictions on Airb&b.

“While prices are much more affordable, it may not last long with housing shortages a problem in many of these highly desirable parts of the country,” Conisbee said.

She said the types of apartments being built in Australia had also changed dramatically over the past decade.

“Whereas apartments in Australia were traditionally the place for younger people to live prior to buying a house, we are now seeing people choosing to live in apartments for longer or to downsize from a large home,” she said.

“Demand is increasing for much larger, higher quality, more expensive developments. This has resulted in the most expensive apartments in Australia seeing price increases more than double those of an average priced apartment.

“This year, with fewer apartments being built, growing population and a desire to live in some of Australia’s most sought after inner urban areas will lead to a boom in luxury apartment demand. ”

The houses that were being built were more likely to be greener.

“While being environmentally aware drives some people to buy green homes, two other factors are now making them desirable for the wider population.

“The first is the rising cost of energy. Having a greener home utilising solar and batteries makes it cheaper to run air conditioning, heaters and pool pumps. The second is that what makes home green also generally makes them safer.

“We are heading into a particularly hot summer and having homes that are difficult to cool down makes them far more dangerous for the elderly and very young. Similarly research into cooking with gas has shown that it can be bad for various respiratory and cardiovascular health issues. ”

Conisbee said despite many predictions of a catastrophic fall in house prices in 2023, they moved in the opposite direction.

“Leading the way has been Perth but the combination of strong population growth and a shortage of homes was enough to combat rising interest rates. As interest rates head close to peak, it is expected that price growth will continue.

“At this point, housing supply remains extremely low and many people that would be new home buyers are being pushed into the established market.

“Big jumps in rents are pushing more first home buyers into the market and population growth is continuing to be strong. Concerns about affordability for both home buyers and renters will be big policy issues for 2024.”

 

 

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