'Great Australian Dream' Fading, Apartment Ownership Rises

17 Jan 2013 - http://news.domain.com.au/

Anja Leszinksy's budget of $420,000 would buy two houses in Chicago or three in Dallas. In Sydney, the most unaffordable housing market in the English-speaking world, it gets her a nondescript one-bedroom apartment about 6.4 kilometres from the CBD or a run-down home on the city's outskirts.

She's opting for proximity to the city.

People are time-poor now. Apartments allow them to access the lifestyle, the infrastructure that's all already there close to the city. 

“I knew properties were expensive, but I'm getting disappointed because they all seem to sell for a lot more than the price indication,” said Leszinksy, a 25-year-old medical device sales representative who's seen about 18 apartments since September and is still searching. “I want to be close to the city. The size of the place is less important.”

Apartment ownership is on the rise as the Great Australian Dream of a house in the suburbs fades for buyers priced out of the market. Apartments and townhouses accounted for 35 per cent of new housing construction in the three months ended in September 30, compared with 29 per cent five years earlier and 21 per cent 20 years ago, according to the federal statistics bureau.

About 13.7 per cent of Australians lived in their own apartments and townhouses according to the 2011 census, compared with 12.4 per cent in 2006.

The shift is giving a boost to multifamily-property developers. Apartment prices rose 0.5 per cent in 2012, compared with a 0.5 per cent decline for houses, according to research firm RP Data.

Apartments focus

Leighton Properties, the real estate arm of Leighton Holdings (LEI), is now focused almost entirely on apartments. Its property division reported a loss that narrowed to $17 million in the six months ended June 30 from $80 million a year earlier.

Stockland (SGP), the nation's biggest listed housing developer, had a 35 per cent drop in profit in the year ended June 30, and last month forecast an earnings decline of as much as 15 per cent in fiscal year 2013, citing sluggish housing conditions. The company said in 2010 it would exit its apartments business.

Stockland shares fell 4.9 per cent in the two years through January 14, compared with a 21 per cent jump in shares of Mirvac Group, whose profit more than doubled in the year to June 30. While Mirvac (MGR)'s mix of units and detached houses fluctuates, the company is building one of Sydney's biggest apartment projects.

“When you look at the future of residential living in Australia, apartments will be a big component of it,” said John Kim, head of Australian property research at CLSA Asia-Pacific Markets. Developers of only detached houses “would have to seriously consider getting into apartments.”

Apartment affordability

Economists have said a shortage of homes helped Australia avoid a US-style crash and keeps prices high, though findings from the 2011 census point to a smaller shortage than initially thought. The country had 7.8 million households in 2011, compared with estimates of about 8.9 million used by the National Housing Supply Council to forecast a shortfall of about 369,000 homes by 2016.

In the US, Sydney apartment buyer Leszinsky's budget of $420,000 would allow her to buy more than two homes in Chicago, where the median price is $152,775, or more than three in Dallas-Fort Worth, which has a median home price of $126,800. That compares with Sydney's median dwelling price of $580,246 as of December 31.

To find a Sydney suburb within Leszinsky's price range a buyer would have to look at least 25 kilometres west of the city centre in Merrylands West, Old Guildford or Villawood, figures from researcher Australian Property Monitors show.