Australian Apartment Market Overview Q1 2023

It remains difficult to call time on the broader housing market downturn with many headwinds remaining for domestic households. Nevertheless, there are good reasons to believe apartments will stabilise before detached housing. Affordability and lower borrowing capacity will push more buyers into apartment price points. Further, stronger migration and foreign student arrivals will keep underlying demand prospects strong. As well as improving demand prospects, apartment supply will fall further in 2023 to low levels and stay moderate for at least several more years beyond that. While developers are becoming more optimistic about demand, higher construction and finance costs are making progressing large scale high density projects difficult and could keep supply moderate for even longer. Build to rent operators are filling some of this gap for high-density projects, but they too are not totally immune to feasibility cost pressures, and it will take some time for the pipeline to materially lift. Limited supply relative to demand, affordability relative to detached housing and cost-push pressures on new stock should all support solid apartment price growth over the medium-term. For the already tight rental market, there appears little relief on the horizon from new stock, so strong rental pressures are likely to continue for some time.