New report finds Australians want more apartments as auction market weakens

Australians want more apartment-style housing and are moving away from detached buildings, a new report from the Grattan Institute has found, underlining the view that the construction industry needs to put more emphasis on high-density living to bring down prices.

The report comes as auctions results from the weekend show clearance rates have once again dropped into the 50s, bolstering views that the market will be at a standstill until the Spring selling season goes underway in October.

The new Grattan report, “The Housing We’d Choose”, surveyed 700 residents from Melbourne and Sydney, and found that housing stock is dominated by detached houses. It found that in 1976, the share of detached housing was 78%, while in 2006 this was at 74%.

But it also found there is a disconnect between the current types of stock on the market, and the type of stock people would prefer to live in.

For example, 7.4% of those surveyed in Sydney said that given prices and their budget, they would choose a semi-detached house in one particular zone of the city. However, the survey found that only 2.8% of the total number of semi-detached dwellings are in that area.

This means there are tens of thousands of families in that area who can’t find the type of accommodation they want closest to them.

Report author Jane-Frances Kelly says while there are a range of factors people take into account when choosing a place to live – such as availability of public transport, shops and proximity to work – she also says there is a growing mismatch between what people say they want and the housing we have.

“There’s a real mismatch between those two factors, and we need to see a better mix of housing, and construction habits need to change,” she says.

The report points out many of the construction factors behind this mismatch could be due to long-standing assumptions and social traits. For instance, early in the 20th century townhouses were largely looked down upon because they were associated with slums.

“In short, many of the detached houses in the Zone 2 and 3 suburbs are a legacy of a time when Sydney and Melbourne were different cities. Today’s stock reflects attitudes formed and decisions made under different conditions, some of which no longer apply.”

Certainly the construction industry is moving towards more apartment-style living. Construction in Melbourne in particular is filled to the brim with high-rise apartments in the inner-cities, which are working to bring down property prices across the city.

But SQM Research managing director Louis Christopher says for the market to be changed in a real way, more cities need to adopt this type of apartment construction – and councils need to allow more construction in suburbs further out from the CBD.

“This is all about the supply issue,” he says. “Would suburbs further out from the CBD allow for multi-story developments en masse? The answer is no, because of the resistance of local community members.”

Outer suburban councils generally don’t allow this type of development due to multi-story requirements due to fears over infrastructure and rapid growth of population living in high-density areas.

But Christopher says that with a growing population, cities will eventually need to adopt high-rise living in suburbs, similar to the methods adopted by various Asian cities. This is also the approach taken by many cities in the United States.

“We have this massive resistance from those residents in urban areas…ultimately the long-term solution has to be more construction of this type of building. These areas must accept that progress has got to continue.”

Meanwhile, auction results show the growing disconnect between buyers and sellers, with REIV chief executive Enzo Raimondo saying “buyers continue to be cautious when bidding and sellers are unlikely to have their price expectations exceeded”.

Melbourne recorded 639 auctions, although only 347 sold resulting in a clearance rate of 54%.

In Sydney, the city recorded a 53.1% clearance rate with 390 reported auctions, while Adelaide and Brisbane recorded clearance rats of 34.8% and 19% respectively.