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The lifestyle in Australia is trending towards luxury apartment living, which dominates the local residential landscape because of a shift in the narrative from downsizing to rightsizing.
According to the report “Rightsizing Australian Prime Residential Insight 2020” by Knight Frank Australia, many retirees prefer to move out of their landed home as their lifestyle changes. More often than not, the cost to upkeep the property outweighs the surplus space once desired.
Although today’s active retirees seek a simple lifestyle as well as the vibe from living near the city centre, their desire is not to downsize the living areas. Rather, it is for the new property to be the right size, with amenities to match the lifestyle.
As such, large prime luxury apartments with an increased number of bedrooms are required to keep up with the growing demand. This is the emerging trend of rightsizing.
Apartment living allows for low-maintenance living, the convenience of a concierge service and the ability to lock up and leave when on holiday.
This trend of rightsizing is also appealing to the younger generation, given the agile, transient and global nature of their work and play.
As a result, apart from active retirees, the two other main categories that dominate the luxury apartment market are entrepreneurs and families (see “Buyer profile of prime apartments”).
Quoting the Australian Bureau of Statistics, in 2018/19, the average built-up of new houses fell 1.3% from the year before whereas that of new apartments grew 3.2%.
Across the major cities of Australia, Greater Sydney recorded the highest portion of medium and high-density dwellings at 42% during the last census in 2016. The Gold Coast local government area was 41%, followed by Greater Melbourne at 32%.
In terms of market share, prime residential sales of Sydney, Melbourne, Brisbane, Perth and Gold Coast from the third quarter of 2016 to the third quarter of last year show that Gold Coast had the highest portion of apartment sales between A$3 million (RM7.9 million) and A$5 million at 26%. This was followed by Brisbane at 22% and then Sydney at 21%.
All five cities saw transactions in the A$5 million-to-A$10 million range, with some performing quite well at 20%. In all cities except Melbourne, this range was outperformed by the A$3 million-to-A$5 million range as well as the A$10 million-and-above range. In Melbourne, the A$5 million-to-A$10 million range outperformed the two other ranges at 13%.
Perth recorded the highest sales in the A$10 million-and-above range with 18%, followed by Sydney with 10% and Melbourne with 5%.
Upcoming dwellings in prime suburbs
As luxury apartment buyers tend to seek a minimum configuration of three bedrooms in prime suburbs, Knight Frank Australia surveyed the medium and high-density developments in this category that will be completed this year to 2022 across major Australian cities. The numbers are compared with those from 2017 to 2019.
For medium-density projects, Gold Coast delivered the highest portion at 70% from 2017 to 2019, followed by Brisbane with 61%. Both cities will continue to roll out more units by end-2022, with 81% and 87% respectively.
Melbourne and Perth are projected to grow their share as well. Melbourne recorded a 43% portion from 2017 to 2019 and will increase it to 52% in the next three years. Perth, on the other hand, will see growth to 50%, from 27%.
Sydney did not follow the growing trend, however, with the share falling from 50% in 2017 to 2019 to 44% in the coming three years. Less than 30% of the 44% will be located in the CBD and inner Sydney, eastern suburbs, inner west and lower north shore.
This will affect prices, as the areas mentioned are close to activity hubs and amenities, which are best suited for those who are planning to downsize and looking for this kind of lifestyle.
Meanwhile, Melbourne and Brisbane, both with 21%, take the lead in the total share of 3-bedroom and above high-density apartment projects slated for completion in the coming three years.
Both Perth and Gold Coast are expected to see a 19% share in the coming three years, growing from 16% and 14% respectively.
Similar to the medium-density projects, Sydney will see a decline in its slice of high-density apartments, falling from 15% to 14%.
Influential trends for the prime luxury market
Knight Frank Australia has identified trends that have the potential to influence the rightsizer prime luxury market in the coming years.
One of the trends sees active retirees spearheading the transformation of the retirement lifestyle. They are well educated, well travelled and tech-savvy. Thus, they will encourage the redefining of the next home purchase — from downsize to rightsize.
Prime suburbs will be undersupplied in the coming three years, as the total number of 3-bedroom and above units being completed is 47% fewer for medium-density and 30% fewer for high-density compared with 2017 to 2019.
The design of luxury apartments will continue to draw inspiration from the most exclusive hotels and residences around the world. This will allow residents to be more agile and minimise ineffective space.
Moreover, according to the report, buyers are prepared to pay a premium for a lateral apartment. Designed to span the entire floor plate, it will offer the closest replica of a freestanding house in the sky with absolute privacy.
Improved connectivity around the world has the potential to reshape the second-home market. This could result in increased competition with offshore buyers. At the same time, it will encourage Australians to buy more second homes abroad, thus rebalancing the property portfolio.