Knight Frank recently released its 2020 Outlook Report, outlining the ten most important factors for the residential property market throughout the remainder of 2020.
According to the Report, apartment supply across Sydney, Melbourne and Brisbane is expected to slow with approximately 142,000 high-density apartments currently under construction or marketed for sale to be built by 2023. This equates to a 27.3 per cent drop compared to the number of completed apartments in the previous four years.
While apartment supply is expected to slow, the developments that do go ahead are expected to be bigger and taller than previous years. The Report outlined that people can expect apartments to grow in size as apartment buildings get taller.
In Sydney, apartment towers will average 14 storeys, compared to nine storeys from 2016 to 2019. Similarly, Melbourne will see apartment towers average 16 storeys, instead of 15 storeys, while Brisbane apartment buildings will average 13 storeys, which is two storeys higher than previous years.
Interestingly, the findings in Knight Frank’s Report outlined that newbuild detached homes may get smaller as the newbuild housing pipeline slows along with the availability of land. The average size of a block for residential development is expected to increase slightly in 2020 to 421 square metres, which is a small increase from the average of 417 square metres in 2018.
A key challenge highlighted in the Report was the expected rise in construction costs as a result of COVID-19 physical distancing requirements. These requirements are expected to slow the construction of detached homes and small-scale residential construction sites. In 2019, construction costs increased by 2.7 per cent.
Another trend expected to continue into next year is the preference for high-density development sites. According to the Report, high-density development sites made up 70.6 per cent of developer and investor sales in 2019. It’s important to note that while local investors and developers may still have an appetite for high-density developments, there will be a slowdown in offshore demand for these sites.
The state of Australia’s property market will be clearer as the country makes some strides in returning to more normalcy and further easing of COVID-19 restrictions. However, a slowdown in new apartment supply and newbuild homes could be welcome news for property investors as continued uncertainty across the economy is causing mixed results across Australia’s residential property market.