I have consistently cautioned that the state and federal governments’ plans to blanket our cities with high-rise apartments will not improve housing affordability.
The reason is simple: it is too expensive to construct apartments. As a result, they cannot be delivered at a reasonable cost to buyers.
Urbis highlighted the excessive cost of apartment development, reporting that selling prices in Australia’s largest cities rose by a record 24% last year, reaching more than $19,000 per square metre.
“In the last couple of years, the majority of sales across the country have been above $1 million, targeting that downsizer market”, Urbis director Mark Dawson stated.
Due to the high cost per square metre, developers have been prompted to build smaller shoebox apartments. As illustrated below by the ABC, three- or more-bedroom apartments make up a modest share of apartment supply in the major East Coast capitals.
Charter Keck Cramer recently handed another blow to the YIMBY ideal of affordable high-rise cities, revealing a six-figure gap between what buyers will pay for apartments in designated Victorian activity areas and the price required for developers to make a profit.
National research director Richard Temlett said there is a $100,000 to $300,000 gulf between buyers’ existing budgets and the cost of constructing units in the majority of Melbourne’s designated activity centres.
“Prices would have to be in the range from $875,000 to $1.05m to turn a profit at present”, Temlett said.
“These are the mid-market, entry-level homes. But our research shows that the market would be willing to pay $775,000″.
“These projects are very, very far from being financially viable”.
Temlett added that buyers have budgets of roughly $10,000 per square metre but developers require at least $12,500 for projects to be profitable.
A new report from CBRE has backed these claims forecasting that Australia will deliver 30,000 fewer apartments this year than previously expected as developers hold off on projects they cannot sell profitably.
“The number of new apartment completions will drop from 64,031 last calendar year to 52,505—well below the 81,880 homes the commercial real estate agency forecast two years ago”, The AFR’s Michael Bleby reported.
“It’s because feasibilities didn’t stack up a year or two ago and projects are running slightly behind schedule”, CBRE head of Pacific research Sameer Chopra told The AFR.
“Even now, feasibilities are still about 20% under water”, he said.
“In the middle of an affordability crisis, the traditional triggers of supply and demand are failing to stimulate more housing development in Australia’s market-led system because it costs more to build new homes than people can afford to pay for them”, Bleby reported.
YIMBYs claim that rezoning our suburbs for high-rise apartment complexes is the number one solution to the housing affordability crisis.
This claim is false. High-rise apartments do not improve affordability because they cost so much to build.
YIMBYs should examine Vancouver, Canada, which is North America’s most expensive city to purchase or rent.
Vancouver has completely transformed into a high-density city following decades of apartment construction.
Having North America’s most expensive home prices and rents is hardly a glowing endorsement of YIMBYism if your goal is housing affordability. Don’t be like Vancouver.
YIMBYs also conveniently ignore serious concerns around the construction quality of new apartments and exorbitant strata fees.
Australian cities would not need to transform into high-rise slums if the federal government did not expand the population so aggressively via excessive immigration.
Without net overseas migration, Australia’s population would not grow, eliminating the need to densify our cities and solving the structural housing shortage.
The fastest, simplest, and most cost-effective solution to Australia’s housing shortage is to simply limit net overseas migration to a level well below the country’s capacity to build housing and infrastructure.
Australia’s housing shortage is the direct result of excessive levels of immigration.
Future Australians should not be forced to live in overpriced, cramped apartment towers.
