Knight Frank recently released its 2020 Outlook Report, and they’ve outlined the top 10 factors for the residential property market for the rest of this year.
According to the report from Knight Frank, supply of apartments across Sydney, Melbourne and Brisbane is expected to drop, with roughly 142,000 high-density apartments currently under construction or advertised for sale to be built by the end of 2023. This is a 27.3 per cent drop compared to the number of completed apartments in the previous four years.
With the expected slowing of apartment supply, the developments that will go ahead are anticipated to be larger than in recent years. The report in question detailed that prospective buyers (and tenants) can expect apartments to be more spacious as apartment builders increase in size.
In Melbourne, we’re likely to see apartment towers average 16 storeys, which is increasing on the 15 storeys of previous years.
Interestingly, the findings in Knight Frank’s report outlined that new build detached homes may get smaller as the new build housing pipeline slows along with the availability of land. The average size of a block for residential development is expected to increase slightly in 2020 to 421 square metres, which is a small increase from the average of 417 square metres in 2018.
One of the main challenges highlighted in the report was the anticipated rise in construction costs as a result of COVID-19 and the physical distancing requirements. Such requirements are expected to result in a slowing of the constructions of detached homes and smaller scale residential construction sites. In 2019, construction costs increased by 2.7%.
Another trend expected to continue into next year is the preference for high-density development sites. According to the report, high-density development sites comprised 70.6% of developer and investor sales in 2019. It’s important to note that while local investors and developers may still have a want for high-density developments, there will be a decrease in offshore demand for these sites.
The state of Australia’s property market will become clearer as the country returns to a more “normal” environment and further easing of COVID-19 restrictions. However, a reduction in new apartment supply and new build homes could be welcome news for property investors as continued uncertainty across the economy is causing mixed results across Australia’s residential property market.
Remember, this article does not constitute financial or legal advice. Please consult your professional financial and legal advisors before making any decisions for yourself.
