A leading residential development review forecasts an ongoing decline in apartments. This comes in a year where total building approvals for new apartments dropped below 40,000 for the first time since 2013, with only 34,100 new approvals in 2020.
However, low-density development site sales record strong growth with the share of total sales growing 23.1 per cent in 2020 (up from 10.1 per cent in 2015), while collective site sales post the strongest result in a decade – accounting for nearly 20 per cent of total residential site sales in 2020.
How the states fare
At a state level, Knight Frank’s Australian Residential Development Review 2021 shows that NSW accounted for almost half of all residential development sales in Australia last year. The state reported $1.98 billion in total sales higher than second-placed Victoria at $1.29 billion. This was the ninth straight year NSW maintained its position as the nation’s leader for developers expanding their sites portfolio.
Despite this, Melbourne emerged as the epicentre for Australia’s built-to-rent sector and led all capital cities in attracting overseas investment in the residential development market. Melbourne had more than 6,000 apartments in the BTR pipeline at the end of 2020, well ahead of Sydney with 3,300 and Brisbane with 1,600. While the $185.4 million invested by overseas developers in Melbourne sites represented 53 per cent 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 of declining high-density apartment site sales across all major capital cities, recording a whopping 238 per cent surge in major site sales purchased in 2020, while the sale of Brisbane high-density sites plunged by 86 per cent 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 per cent in 2020, as confidence increased among local developers.
Submarket outperforms mainstream residential
Knight Frank’s Head of Residential Research, Michelle Ciesielski, says: “Across every residential market, there is always a submarket outperforming. Although we’re hearing of 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.”
The 2021 study is the eighth edition of an annual publication covering the key economic trends and drivers for low, medium and high-density residential developments across Australia’s major capital cities. These results also have flow-on effects in regional centres.