Will The Apartment Market Affect The Housing Market?
If you’ve ever examined the figures for dwelling values closely, you’ve no doubt noticed that the price of Sydney’s apartments and houses don’t often move in unison.
For instance, according to CoreLogic, Sydney house prices fell 4.2% in the final quarter of 2018 while apartments fell only 3.4%. Conversely, when the Sydney market was at its peak in 2016, Sydney house prices registered a total year-on-year rise of 20.3% while apartments grew 14.1%.
We explore why this is the case and how one influences the other.
A case of many markets
We’ve often written about how Sydney’s Eastern Suburbs isn’t one market but many. Nowhere is this more obvious than in the difference between apartments and houses.
The majority of people tend to focus their property search on one or the other. It’s only a small minority who’ll be searching for both simultaneously.
Of course, the audience for any property will depend on its size, location and price point. But generally speaking the audience for apartments will consist of a much higher proportion of first home owners, investors and – increasingly – downsizers than the housing market. That’s often because they tend to be cheaper (at least sometimes), easier to maintain and – for investors – produce a higher yield than houses.
The relationship between the two
That said, there is also a strong relationship between the two. Younger people who’ve entered the apartment market still tend to upsize into a house when their family begins to grow, although this trend is becoming less pronounced than ever before.
At the other end of the spectrum, downsizers are increasingly tending to leave big house living behind once the kids leave home, selling up to move into a quality apartment.
Anytime the value of apartments rises more quickly or falls more slowly than houses, it tends to be great news for people looking to upgrade. That’s because the gap between the price of apartments and houses narrows.
So as we’ve already written, now is a fantastic time for buyers looking to take the next step on their property journey.
Why apartments have held value better than houses
One of the main reasons apartments have held up better than houses Sydney-wide is partly due to the buyers they appeal to.
Statistics show first-home buyers – one of the key audiences for apartments – re-entering the market in bigger numbers than for some time. Meanwhile, APRA’s announcement that it would end the cap on interest-only loans should help encourage investors back into the market.
And, more generally, we’re increasingly seeing a trend of people favouring apartment living regardless of their life stage.
All of these factors are combining to make sure apartments – especially quality ones in blue chip areas – stay in demand.
Thinking of buying or selling in Sydney’s East in 2019? Get in touch with our team today.