Apartment living to reinvent itself post COVID: Five minutes with John McGrath

While house values have rocketed over 2021, apartment values have too quietly shown steady growth over the year to date.

And as house prices continue to escalate and become affordable for many, apartments are becoming a much more attractive, and necessary, proposition, with further growth forecast when international borders open and investors come back in to the market.

Urban recently caught up with John McGrath, who founded McGrath back in 1988, to discuss how the apartment market went in 2021, and how it is shaping up for the next few years.

JC: How have you viewed the performance of the apartment market (established and or off the pl​an) in 2021, and what are the strongest positive and negative factors that will influence outcomes in 2022 and 2023?

JM: There’s no doubt that apartments, other than luxury, have missed much of the price surge that established houses have enjoyed.  In many locations we’ve seen houses prices escalate by 35-40% and in those same areas we’ve seen a more modest 5-10% rise in apartment values.

There are a few reasons for this. Firstly, apartments have a larger investment buyer profile & the strongest demand has been from owner occupiers. Also a large percentage of apartments that are not bought by investors sell to first home buyers who generally don’t have the same buying power or discretionary spending that is appearing higher up the price chain.

And finally, in many of the big cities apartments have been hit hard by the closure of international borders & less inflow of migrants & students which have increased vacancy & reduced rental returns momentarily. But I think if anything this makes apartment buying represent better growth in many parts of the country as houses become less affordable and overseas borders open up in 2022.

JC: What trend (short term or long term) has prompted your greatest enthusiasm for the apartment market, and what is the issue of most concern to you and or your clients?

JM: In general apartment living has replaced the traditional quarter acre aspiration for many Australians due primarily to housing affordability for younger buyers and also an ongoing desire to live in urban, inner city and beachside locations. And whilst COVID has driven many buyers to more remote lifestyle areas there’s no doubt that convenient, secure, low maintenance strata living will continue to be in great demand as we move through the immediate impacts of the pandemic.  

And as COVID has changed the way many of us live, many developers have also pivoted & are now designing and buil​ding apartments that cater to the needs of this changing environment. And finally I believe the ideal combination of many empty nesters moving forward will be a great inner city living space along with a getaway within two hours so apartment living will reinvent itself and deliver the population what it wants post-COVID.

JC: Has urbanisation stalled or what will it look like over the decade ahead?

JM: As more employers and employees discovered that they no longer need to travel to a central location to effectively conduct their work I believe we will find a reduction of 25-35% of the workforces commuting daily to the CBD and commercial centres.

So this will have an impact on many jobs, employees and employers. Ans as many opt for home-based work this will undoubtedly have some impact on the shape of home and work environments & locations.

Proximity to these commercial hubs for a percentage of the population will become less of a priority and lifestyle benefits such as proximity to family, beaches and parks will move up the checklist. But many people still want to be located within a reasonable commute of the many lifestyle benefits located in and around the CBD so I have no doubt that demand for these will continue to be in high demand.

JC: How important do you view the push for sustainability practices in the apartment market/new housing estates, and what initiative has seized your interest or focus? 

JM: With more & more demand for environmental sustainability from all generations there’s no doubt that buildings that are both gentler on the environment and more self-sufficient will become increasingly popular, especially for the younger generations.

As yet we’ve seen some movement in this direction but I expect this to rapidly escalate moving forward due to increasing education and agitation towards a cleaner greener environment. I think we will see this manifest in more environmentally friendly building materials as well as buildings that are less taxing on the planet once built.

Even though much of the demand has been driven from Generation X & Y we are also seeing older generations paying more attention of late which will increase the pressure on developers to build bu​ildings that fall in line with not only council expectations but more importantly the expectations of the community and residents.