JANE AGIRTAN INDEPENDENT

We’re a long way from new apartments being the solution for the housing supply problem. Two major hurdles stand in the way: the market and the economics.

The apartment market is now almost entirely skewed towards premium apartments, with entry level units all but evaporating from sales.

That’s why we’ve gone from building 25,000 apartments a year in Melbourne in the mid-2010s to just 4000 a year.

Vast majority of buyers still want at least three bedrooms in their next home (or 2.5 bedrooms for first home buyers). Buyers also overwhelmingly don’t want these bedrooms to be in an apartment building.

It costs at least three times as much to build a square meter of a new apartments compared with a good-quality townhouse, or four times more than a new detached home. This means only apartments that generate a suitable return on investments are premium, boutique apartments targeted at wealthy downsizers.

For project to be feasible developers now need to sell apartments at the rate of $14,000 per square meter – 40% higher than selling costs before covid.

This translates into a small one-bedder at $650,000; two bedroom of 70 sqm at nearly a million bucks and a three bedroom at 1.5 million or more – these are not the prices attainable for any median income earners let alone students, migrants or fist home byuers.

I grew up in a 33 sqm commie block in Eastern Europe and having lived in much nicer apartments in Middle East in my 20s this is definitely NOT the type of dwelling I would consider for my family.

https://www.theage.com.au/politics/victoria/i-m-a-developer-here-s-why-jacinta-allan-s-high-rise-plan-won-t-get-off-the-ground-20241023-p5kkl8.html