Bubbles, boom and bust are all the buzzwords of the property prediction industry. They have about the same success rate as the flip of a coin. As the honest economists will admit, it’s way easy to predict things after they happen.
The moment apartment dwellers have feared has arrived. For the first time ever, it costs as much to rent an apartment in Sydney as a house, the median cost for both is $550 a week. This defies supply and demand dogma as rents have jumped $20 a week during the June quarter, all the while with new apartment blocks proliferating at record levels.
The latest Domain State of the Market Report details the full catastrophe. It’s enough to put you off your smashed avocado and green eggs. The experts predicted the opposite, which proves nobody really knows anything, cold comfort indeed as you put on an extra sweater to minimise your heating bill.
Tenants Union of NSW senior policy officer Ned Cutcher actually believes it’s because of the rise of apartment building.
“I think it’s the outcome of the wrong kind of supply being pushed into the market. Development is driven by what investors want rather than what households need,” Mr Cutcher told Domain in the Sydney Morning Herald.
“Higher priced apartments are being built where traditionally affordable homes were, at increasing densities and this is what you get.
He believes the biggest problem lies with developers feeding the investor demand for units that maximise their returns and appeal to young professionals, leaving families fighting it out for larger apartments.
Older inner city and mid-suburban housing blocks are bought, consolidated and developed into expensive boutique apartments,
Tenant’s advocacy site Don’t Rent Me founder Antony Ziebell agrees.
“I would blame unsuitable apartments being built en masse and rented at prices which are focused on maximising returns and sale prices, rather than the kind of homes we need,” he said.
“The supply numbers the government boasts about largely include an enormous amount of one bedroom units [which is] unsuitable housing for most,” he said.
Chief executive of developer lobby group Urban Taskforce, Chris Johnson, thinks that the $10,000 cost per square metre for an average apartment makes the smaller units a favourite of investors and developers.
“Building a smaller apartment is the most fundamental way to reduce price point,” say Mr Johnson. He also attributes design requirements having an effect.
“Part of the problem is that we have got very high design standards set by [the government] and this keeps prices high in NSW compared to Victoria … if you built a two-bedroom apartment [under Victorian standards] you’d save $150,000,” he said.