Housing
AFFORDABILITY SQUEEZE REWRITES APARTMENT V HOUSE RULE
Author: Patrick Lau The Urban Developer
Warning signs are flashing that property prices are on the precipice of a downturn. Meanwhile, state and federal governments are pushing for densification as a solution to the housing crisis.
“I think it’s reasonable to say that, ultimately, affordability challenges cannot be attributed solely to apartment supply shortages,” Riga says. “The key theme is supply does still matter, but ultimately demand-side settings such as availability of credit, investor incentives, tax treatment and other factors can materially impact affordability as well.” Domain chief economist Nicola Powell tells The Urban Developer that cyclical shifts in monetary policy and structural shifts in tax treatment have made the property market more complex. “Over time, houses tend to find greater rates of capital growth and ultimately it’s the land component that drives not only that higher price, but that better performance,” Powell says. However, the “affordability dynamic” has now entered into play as well. “That’s not only borrowing capacities, but also the
While there’s significant disagreement on what kind of property market will emerge on the other side, economists and analysts are suggesting that apartments may outperform houses in the near term, despite efforts to increase supply. Urbis partner Paul Riga tells The Urban Developer that both sides of the property sector are in “a holding pattern” until clarity emerges over whether apartments are affordable homes or growth investments. “It’s real life, it’s dynamic, and things are shifting. There’s broader impacts and changes that are coming at us on a daily basis,” Riga says. Urbis data shows that in the first quarter, local investors increased to 28 per cent of buyers, the highest since 2017. Owner-occupiers led at 52 per cent, while prices were stable at $17,165 per sq metre. Delivery of about 23,000 apartments per year is expected over the next two years, off the peak and reflecting a constrained market, according to Urbis.
Apartment builds will hover around 23,000 per year for the near-term, Urbis says.
Domain is forecasting apartment prices to outperform houses as markets soften.
20 – July / August 2026
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