‘Horrible’ and high-risk: Is an apartment a good investment?

By Cameron Micallef

October 09 2019
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The thousands of reported defects for high-rise property in the recent past should be of less concern to investors than the lower value growth rate of apartments when compared with houses, new research has revealed.

According to Propertyology, the financial performance of high-density apartments in every Australian city over the last decade has been “horrible”.

Simon Pressley, Propertyology’s managing director and property analyst, has expressed a belief that investors are taking on increasing risk when they buy apartments.

“Each and every year that an individual city’s housing market performs sluggishly, the risk of high-rise apartment value decline significantly increases,” Mr Pressley explained.

This is on top of the numerous high-rise apartment owners who have encountered structural problems in the last two decades.

“For a variety of reasons, Propertyology is very concerned for all owners of high-rise apartment that were built in the last 20 years,” the property expert said.

“One such concern is the enormous repair bill for major structural defects – several highly publicised buildings being just the tip of the iceberg.”

Melbourne

When compared directly to its own city’s performance of detached house prices, the Victorian capital’s high-rise property market has performed significantly worse than every other Australian city.

While Greater Melbourne’s median house price has increased by 91 per cent over the last 10 years, apartments in Abbotsford, South Yarra and Balwyn, St. Kilda and Richmond saw value growth at just 3 per cent to 35 per cent.

Brunswick was provided as an example where the median house price increased from $540,000 to $950,000 in 10 years, compared with apartments which saw a value increase from $400,000 to just $513,000.

Canberra

In the nation’s capital, 62 per cent of all new dwellings approved over the last 16 years were apartment and town houses.

Over the 10-year period ending May 2019, Canberra’s median house prices increased by 46 per cent.

Median apartment price increases were below 20 per cent across 25 of Canberra’s suburbs.

Brisbane

Brisbane’s year-after-year modest price growth for all of the last decade has accumulated in a 36 per cent increase in Greater Brisbane’s median house prices.

Twenty of the city’s suburbs were found to have weaker growth than comparative houses.

Sydney

Over the 10 years ending May 2019, Greater Sydney’s median house price increased by 100 per cent, with a majority of this value hike occurring before July 2017.

An increase in apartment construction in recent years has led to a 25 per cent increase in apartment prices, but the findings also showed that there are thousands of Sydney apartments worth significantly less today than they were four or five years ago.

Perth

While the last decade has been lean for the west coast, Greater Perth’s median detached house prices still grew by 19 per cent.

Over the same period, the city’s suburbs produced between zero and 32 per cent decline in median apartment value.

Adelaide

Running parallel to Brisbane over the last 10 years, Greater Adelaide median house price increased by 31 per cent during the decade ended May 2019.

Apart from Adelaide’s city heart and surrounding suburbs, apartments are not prominent in Adelaide, so a comparison saw growth for Adelaide’s houses outperforming apartments by 19 per cent, while apartment values grew by 12 per cent.

Darwin

Compared to the more southerly cities, Darwin has suffered low growth over the past decade, with just 14 per cent increases in house values occurring over the 10 years ended May 2019.

There are 10 suburbs in Darwin where median apartment prices are lower today than 10 years ago.

About the author

Cameron Micallef

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron Micallef

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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