Victoria sees growing demand for units
Towards the back end of 2023, there’s been a growing demand in Victoria’s property market for units instead of houses.
Jacob Caine, president of the Real Estate Institute of Victoria (REIV), said Australia’s ongoing housing affordability concerns are diverting buyers away from houses towards units.
Speaking on The Smart Property Investment Show, he flagged several factors driving this demand.
One such factor is the number of renters transitioning to first home buyers.
According to Mr Caine, rents have lifted significantly in some areas of the state, and these renters have compared the difference between servicing a mortgage and paying their monthly rent.
In the end, many have found that the gap between payments isn’t that significant, which resulted in them thinking they may as well be paying off an asset of their own.
That’s been compounded by the five interest rate rises of 2023, which had priced many people out of a house.
“It also pushed some people that might have been looking for a small entry level house down into a more affordable solution, being an apartment which could be within their borrowing power,” he continued.
On the other end the affordability spectrum, Mr Caine said the lifestyle of apartment living is now an appealing prospect for people that are looking to downsize or decomplicate their life.
He stated: “We do see that segment of the population also driving the upper end of the apartment unit market.”
With a number of new developments coming onto the market, the REIV president said it “will continue to present a really attractive option for those people that are wrestling with what their budget looks like and what their borrowing power looks like”.
Looking ahead, Mr Caine confirms that the issue of affordability will linger throughout 2024.
He explained that while the previous interest rate rises are having a genuine impact on inflation, it’s also the international factors that will continue to keep the prices high, as well as the shortage of supply and construction’s current inability to meet needs in a timely manner.
“We should expect that to continue, even if there is stability in the interest rate market.”
Listen to the full conversation here.
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