CORONAVIRUS COVID-19 PANDEMICRESEARCHRESIDENTIAL PROPERTY

Apartment sales tumbles across Australia

Print Friendly, PDF & Email

THE Gold Coast defied a national plunge in residential development site sales 2020, as COVID forced transactions to a seven-year low, while the national apartment pipeline will plunge over the next three years.

According to Knight Frank’s latest Australian Residential Development Review, Australia’s $4 billion of sales recorded in 2020 was down 19.6% from the $5.03 billion recorded in 2019, and well below the 2014 peak of $11.3 billion.

Just 86,400 new apartments are planned across Sydney, Melbourne, Brisbane, Gold Coast and Perth, a 36.1% decline from the 135,300 new apartments built during the prior three-year period covering 2018 to 2020.

Total building approvals for new apartments dropped below 40,000 for the first time since 2013, with only 34,100 new approvals last year.

The residential development market has been severely impacted by a decline in offshore investment, which plummeted to pre-2013 levels with less than $0.5 billion in overseas capital invested in 2020. This was the first time since 2012 it had dropped below the $1 billion mark, and again a far cry from the peak of $5.25 billion in 2016, and down from $1.4 billion in 2019.

However, developments being locally driven has meant significant growth in low-density site sales, with the share of total sales up from 10.1% in 2015 to 23.1% in 2020 – the result of substantially more land being released for low-density in growth corridors in the major cities over recent years, developers taking on lower risk projects, and the federal government’s HomeBuilder incentive.

Sites sold collectively – those with the potential for residential development and including more than one vendor – also performed strongly, accounting for 19.8% of total site sales. This was 6.2% higher than 2019 and its biggest result of the past decade.

Shayne Harris, Knight Frank’s head of residential, said developers across the country are continuing to shift their focus and risk towards boutique apartment developments and diversifying their portfolios with low-density sites.

“Although we’re in uncertain times, we can’t underestimate the impact investors will have on the apartment market as they start to return across the country. It’s only time before they’re lured back to the new apartment market given the cheap finance, a thinning new supply pipeline and lowered residential vacancy rates.”

NSW accounted for almost half of all residential development sales in Australia last year, with the $1.98 billion clearly ahead of second-placed Victoria at $1.29 billion. This was the ninth straight year it maintained its position at the top.

Despite this, Melbourne has emerged as the epicentre for Australia’s build-to-rent sector. It had 6,000 apartments in the pipeline at the end of 2020, well ahead of Sydney with 3,300 and Brisbane with 1,600.

The $185.4 million invested by overseas developers in Melbourne sites represented 53% of all international investment made in Australia in 2020 ($351 million) and ahead of Sydney sites ($139.1 million in 2020).

The Gold Coast bucked the national trend seen in the major capital cities with a 238% surge in major site sales purchased in 2020. Brisbane saw high-density site sales plunge by 86% in 2020 with a diminishing pipeline of just 6,075 new Brisbane apartments to be built by 2024, down from 13,850 in 2018-2020.

In Perth, demand for high-density apartment sites rose with annual sales turnover of 10.7% in 2020.

Knight Frank’s head of residential research, Michelle Ciesielski said that while there are record sales being achieved in the upper echelons of the residential market, it’s the underlying mainstream residential market recording stronger growth than one year ago.

“The demands of apartment buyers are evolving. We already knew downsizers are most attracted to a three-bedroom configured apartment, but with the pandemic, there will be increased competition from other cohorts securing this third bedroom for the home office and potentially second living room, when required.”

Related posts
CORONAVIRUS COVID-19 PANDEMICGENERAL PROPERTY

Bring back JobKeeper, construction industry joins NSW Treasurer call

WITH lockdowns and restrictions raging on across much of the country, the construction industry in…
Read more
CORONAVIRUS COVID-19 PANDEMICREAL ESTATE INVESTMENT TRUSTS & FUNDS

GPT shaken by lockdowns, pulls profit guidance

GPT Group has withdrawn its funds from operations amid an extended lockdown period in the major…
Read more
RESIDENTIAL PROPERTY

First home buyers target Regional NSW

FIRST home buyers in the regional NSW market are targeting suburbs within commuting distance of…
Read more