Apartments market to take a hit as house prices dip

Improving supply and affordability of detached housing is expected to cut demand for apartments in big cities.

An improvement in the supply and affordability of detached housing is expected to reduce demand for apartments in Australia’s major cities.

The Housing Industry Association’s National Outlook report showed an unprecedented volume of new homes built since 2014 was putting downward pressure on prices.

HIA principal economist Tim Reardon said the fall in house prices in Sydney and Melbourne was one indication affordability was improving, as was the stalling of rental price inflation in the June quarter. “That tells us the pent up demand for new housing in Sydney and Melbourne is beginning to be met with a record volume of supply,” Mr Reardon said.

“The market for apartments in metropolitan areas will be the most significantly affected by the improvement in affordability and by regulatory imposts.”

Detached house starts in March 2018 were the strongest quarterly result in 18-years, with over 120,000 new houses expected to be built for the 2017/18 year.

In contrast, multi-unit commencements fell by 3.2 per cent from the previous year, and further declines of 12.7 per cent and 10.1 per cent were expected this year and the next respectively.