With the threat of oversupply looming in almost every capital city, how can you be sure it is still safe to invest in new residential developments?
There’s no denying the Australian property market has changed, particularly when it comes to apartments.
Almost every day of the week you will find the term “apartment oversupply” floating somewhere in the pages of your local newspaper, on the airwaves, or on your screen. In fact, if you looked up Melbourne or Sydney in the dictionary, it’s likely you’d find it as the definition.
Slowly but surely, the major players in the property market are indeed becoming more responsive and intuitive. While we believe in the need to legislate a minimum standard of living, meaning minimum apartment sizes, sources of natural light, and ventilation among others, there are many interesting insights interacting and immersing yourself in the market can provide. These often have a flow-on effect among developers, which ultimately creates a benchmark in the market which others will follow if they are wanting to profit. In these cases, such responses often deliver much faster and higher quality outcomes than what legislating can provide.
At present, one of these insights is the sweet spot in the apartment market, and one that both investors and buyers should take note of. This is a spot that is sought after among purchasers, a viable product for developers to produce while also making a profit, and a spot where banks are more willing to lend.
In the realm of one-bedroom apartments, this is 50 square metres, while for two bedrooms, it sits at 70-75 square metres. Increasingly, these are apartments that also integrate a well-conceived floor plan, which remove ‘dog legs’, including unnecessarily long hallways, impractical kitchens, and compromised living spaces. In turn, the creation of more liveable space can often make a one-bedroom apartment the equivalent of a two-bedroom apartment under previous market standards.
Moreover, it augments the modularity of these apartments. Allowing buyers an opportunity to creatively purchase means much greater value if they are to combine two together. Rather than buying a dated detached or semi-detached property in an inner-city suburb and paying in excess of $1 million, you would be securing a property of equivalent size that offers a much higher level of amenity for an equivalent or lesser cost.
It is glaringly apparent that the investor-grade stock that once flooded the market, employed in a 'stack them high and watch them fly' approach is no longer suitable nor respectable. Developers need now, more than ever, to establish positive relationships with key stakeholders, whether they are policy makers, financiers or purchasers. Respect, consultation, proactivity, and responsiveness are the key pillars to ensuring the property sector remains an important component of bolstering our domestic economy, and receives ongoing support from those parties it relies on heavily.
This means creating housing stock that integrates into the urban context of the neighbourhood, provides a high-degree of structural integrity, and delivers an appealing living proposition that meets the current demands of the market while also remaining a viable component in the future.
Heath Thompson is the associate director of Beller Project Marketing. Heath grew up in a property development family and completed a Bachelor of Business Property at RMIT, specialising in Property Valuations. This was followed by more than 12 years completing a variety of development projects, ranging from apartments to hotel accommodation across Melbourne and country Victoria.
Heath has developed a depth of experience across multiple property sectors and understands the pressures and challenges that a property developer faces better than most.
Heath shares his extensive real estate expertise to help his clients improve the value of their property assets through strategic development and effective marketing. For Heath, experience, professionalism and accurate information are key in achieving successful results for his clients.