Hi, Andrew Bell here.
Today, I have a substantial update on the current state of the Australian housing market.
Firstly, the market is seeing a significant shift, with affordability driving unexpected trends across different property types. Affordable house prices are now growing faster than those in the luxury market, while the opposite trend is evident in the apartment sector.
In the affordable housing segment, the widening cost gap between newly built and existing homes is influencing buyer behaviour. Established homes in this category are garnering increased interest due to their affordability and locations in well-established neighbourhoods. This trend indicates a broader market shift, leading to stronger price appreciation for established properties. This is why I have emphasised several inner-city properties over the past month, as this segment continues to gain momentum.
Conversely, the apartment market is showing a different trend. Luxury apartments are outperforming more affordable ones in terms of growth, driven primarily by downsizers—older homeowners or retirees who are less impacted by interest rate fluctuations due to their substantial equity or cash purchasing power. These buyers are willing to pay a premium for high-quality, spacious apartments that offer comfort and convenience. Unlike the affordable housing sector, the luxury apartment market is relatively unaffected by rising construction costs. While financial constraints challenge developers building cost-effective apartments, the premium sector can absorb higher construction expenses as affluent buyers are prepared to pay. This dynamic has fueled growth in the luxury apartment market, even as other real estate segments face challenges.
Although building approvals have seen a modest increase, reaching a 15-month high, it’s important to note that these are approvals—not actual construction. In the new construction space, detached houses dominate, accounting for 62% of new dwelling completions. The apartment market, on the other hand, has declined by 23%, while townhouses remain steady at 15%.
The challenge for new apartment developments lies in the high costs associated with construction. Even when developers attempt to present feasible projects, they struggle to secure valuers’ support for the sale prices needed to proceed. Banks are cautious, often rejecting financing proposals for affordable apartment developments due to the high risks involved.
As a result, few developers and builders are active in the market. Those who do manage to build often focus on small-scale projects, which barely make a dent in the significant demand. Only major developers, like Meriton, with in-house construction capabilities, are able to build large complexes that help address the demand for affordable apartments. The collapse of many builders has left only those with integrated construction operations capable of moving forward with projects.
A new trend has emerged: the shrinking land sizes for new developments, paired with larger dwellings on these smaller plots. This reflects a growing demand for more space, despite the market’s previous preference for smaller homes. It’s interesting to note that although 22% of Australians live alone and 25% live as couples, this trend of increasing dwelling size continues. With rising construction costs and cautious borrowing behavior, it’s likely that this trend could shift in the future.
On another note, bookings for The Event 2025 are pouring in. Many potential sellers see this as the ideal time to capitalize on four strong years of price growth in the market.
A reminder: while several Ray White offices on the Gold Coast may use the term “event” in their marketing, there is only one trademarked “The Event,” which stands as Australia’s premier property marketing program. Last year, we sold 110 out of 120 properties marketed throughout January. With over 30 years of proven success, The Event is not just the best time of year but the best method for selling a property on the Gold Coast.
For more information, use the QR code displayed on the screen, which will direct you to our dedicated website. Spaces are limited, so don’t delay in reaching out. Regardless of your property type or location, we’ll ensure you achieve the best possible result.
I look forward to reconnecting in a fortnight as we move toward the closing month of the year.
Andrew