Australian Apartment Market Overview Q3 2023

After a four month pause, the RBA raised interest rates in November and reminded households the battle against inflation is not yet won and that interest rate pain will last longer yet. Nevertheless, a rebound in existing dwelling prices in the past eight months is boosting confidence in the housing market.

Conditions in the apartment market remain mixed. Investor demand is still soft with few larger scale projects are progressing to construction. In contrast, demand for quality new boutique apartment projects remains robust, driven largely by downsizers that are much less interest rate sensitive.

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. Developers want to build but high costs, financing uncertainties, and ongoing shortages of construction labour all continue to make development very challenging at present.

Build to Rent (BTR) is gaining momentum but the boost in BTR supply won't be enough to fill the gap of declining 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 be a constraint on rental growth in many markets.