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Demand up for smaller apartments
Susan Welling and Isobel King
April 27, 2012
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Small packages
The rise of the one-bedder. Property editor Stephen Nicholls reports.
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Affordability, not space, is now the unit drawcard and developers are responding to that shift.
Apartment sizes across Australia are shrinking as developers race to provide cheaper homes for cash strapped buyers in what have been named some of the least affordable major housing markets in the world.
Plans for blocks filled with large three-bedroom apartments are being hastily redrawn in favour of a much greater proportion of one bedroom units, often at well under the $600,000 threshold for stamp duty exemptions in NSW and eligible for 20 per cent duty reductions in Victoria.
‘‘There’s been a big change and developers are looking increasingly to one-bedroom apartments, which are a lot more affordable for young people or investors,’’ the managing director of CBRE Residential Projects, David Milton, says.
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Size counts ... Sydney's Harbour Mill, like other developments, has shifted its focus to include more one-bedders.
‘‘They’re focusing more on well designed smaller apartments, which is a market that’s now particularly strong.’’
Of the new developments now being unveiled across the country, many contain a significantly greater number of one-beds than originally intended. Some only include a nominal scattering of three-beds purely because local councils demand it and not to build them would trigger heavy penalties for developers.
‘‘We feel the price point is around $600,000 and once you go beyond that, the market is much more rarefied,’’ says Robert Magid, chief executive of The Magid Group Developments, which has just announced the five-building, 535-unit Sydney project Rosebery Park, with its first stage launching in mid-June.
Harbour Mill.
The first release, Genesis, will feature 33 one-beds, 66 two-beds and just six three bedders.
‘‘Only 10 per cent are three-beds and that’s only because it’s demanded by the City of Sydney Council,’’ he says.
‘‘The council skews the market enormously with a variety of penalties if we don’t comply.’’ In Sydney, the emphasis on smaller apartments is growing rapidly, especially with the city being named the third-most unaffordable major housing market in the world, with its median housing price standing at 9.2 times the median income.
Melbourne's Kingsford.
The annual Demographia International Housing Affordability Survey announcement is in stark contrast with its recommendation that housing prices should not exceed three times gross annual household incomes.
It’s not much better in Melbourne, either. It’s been ranked the fourth most expensive city globally, with a median multiple of 8.4, while Brisbane has recorded a score of six.
The most expensive cities are Hong Kong and Vancouver.
Brisbane's Brooklyn on Brooklyn.
The managing director of the AWM Development Group, Ashley Muir, has trimmed sizes of houses in his new Melbourne master planned Kingsford at Point Cook in order to make them more
affordable.
Compounding that challenge, he says, has been the squeeze on developers from tightening finance regimes and increasing construction costs.
It’s a similar story in Brisbane. One of the city’s largest inner-city developers, Metro Property Development, originally had 195 apartments planned for its Brooklyn on Brookes project in Fortitude Valley. A month ago, the larger two-bedroom, two bathroom apartments were ‘‘reconfigured’’ to about 84 square metres to allow for an additional 21 one-bedroom apartments.
‘‘Research told us the appetite for inner-city apartments priced between $600,000 and $750,000 was quite subdued, with a trend towards smaller, cheaper apartments,’’ the communications manager for Metro, Peter Hobbs, says.
At the same time, plans for Metro’s Madison Heights development in inner-city Bowen Hills have been amended to increase the number of apartments from 286 to 308, allowing for additional studios and one bedders.
‘‘It comes down to more efficient use of space in terms of design and people are definitely wanting more affordable stock that can rent easily,’’Hobbs says.
The site that’s currently sparking the most interest in Sydney is that slated for Harbour Mill, incorporating the historic Edwin Davey & Sons Flour Mill close to the Anzac Bridge at Pyrmont.
Of the spectacular 139-apartment Ceerose development, 65 per cent will be priced at less than $600,000 with studios (40 square metres to 70 square metres) from $395,000, one-beds (55 square metres to 80 square metres) from $495,000 and one-beds-plus-study (70 square metres to 80 square metres) from $550,000.
‘‘Affordability is probably the primary explanation, but the location is an element as well in its appeal to a certain demographic,’’ an agent with CBRE Residential, Jean-Paul Markopoulos, says.
‘‘The price point is a key driver for state government stamp duty exemption and definitely the demand is there at the moment.’’
The director of developers Cornerstone, Michael Grant, has already tested that market and found it extremely strong for the right product. His 66-apartment Danks Street, Waterloo,
development Casba – of which 32 were one-beds – sold out totally within six weeks, 45 of them on the same day it was launched.
‘‘Affordability was a key but we also offered a very different product,’’ he says. ‘‘There are a lot of one-beds within a five-kilometre radius there and cheaper – in the high $300,000s and mid-$400,000s – than ours, but Casba has beautiful stone floors, big balconies and beautiful curtains billowing in the breeze, all inspired by Morocco.’’
At Erko in Erskineville, there will also be a lot of one-beds in the 300-unit mix, as well as at the 190-apartment Bates Smart development Gantry in Camperdown.
Then there’s Madison, developer Loftex’s latest project in nearby Waterloo, which was originally approved as a 43-unit development made up largely of one- and two-bedders.
‘‘Then we got feedback the market was definitely trending towards smaller, more affordable apartments for the specific reason the high end of the market is slow,’’ says general manager Rob Turchini, who knows of a number of Sydney projects submitting amendments to council to convert three-beds into two one-beds.
As a result, his project has also been amended to shrink the size and price of the two-bedders, and add extra smaller units.
The NSW general manager of residential at Australand,Nigel Edgar, sums up a common reaction: ‘‘Our mix has changed to more price pointed, affordable product and we’re doing less three-bedders.’’
The chief executive of apartments and commercial at Mirvac, JohnCarfi, confirms the trend.
‘‘You invest a lot of time and money getting designs and approvals up, but the issue for apartment buildings is to be nimble enough to adapt to market shifts, even to the point we have made changes during construction because a particular product isn’t selling,’’ he says.
