Australian Apartment Market Overview Q2 2023

Prospects for the broader housing market have improved somewhat in recent months and existing dwelling prices have now grown the past five months. Nevertheless, headwinds for housing are not over yet and momentum is likely to slow a little as interest rates peak and see a boost in listings into the existing market. Conditions in the apartment market remain mixed, but steadily improving. Demand for new mass-market product remains soft, but demand for quality new boutique apartment projects remains robust, driven largely by downsizers. Over the medium-term, the main concern for the apartment market remains whether enough stock will be built to keep pace with rapidly rebounding population growth. Development conditions remain very challenging at present. In particular, there are few larger build to sell projects (with longer selling periods) progressing to construction anywhere across Australia. Build to Rent (BTR) is gaining momentum since important tax changes were made in the May budget, but the boost in BTR supply still won’t be enough to offset the decline in overall apartment supply over the next few years. This means there will be little relief for tight rental markets across the country, albeit affordability is starting to constrain rental growth in many markets.