I have frequently cautioned that state and federal government plans to blanket our cities with high-rise apartments will not help Australian housing affordability and will reduce livability.
The reasons are simple: it is too expensive to construct apartments. As a result, they cannot be delivered at a reasonable cost to buyers.
Urbis highlighted the excessive cost of apartment development, reporting that selling prices in Australia’s largest cities rose by a record 24% in the December quarter of 2024, reaching more than $19,000 per square metre.
“In the last couple of years, the majority of sales across the country have been above $1 million, targeting that downsizer market”, Urbis director Mark Dawson said.
Because of the high cost per square metre, developers have opted to build smaller shoebox apartments. As illustrated below, three- or more-bedroom apartments constitute a tiny share of the national apartment supply.
The construction quality of new apartment complexes in Australia is also poor, while strata fees are excessive, further hindering affordability.
AMP chief economist Shane Oliver highlighted another problem with apartments: the long time.
As shown above, the number of years it takes to build apartments in Australia has increased from around 1.75 in 2013 to 2.75 in 2024.
By contrast, it takes around one year to build a house and 1.4 years to build a townhouse.
The first chart above from Michael Matusik also shows that detached houses and townhouses are far cheaper to build than apartments.
If density and affordability are the goal, the data above suggests that townhouses are the superior option. They cost the least to build and can be delivered in a reasonable (albeit still too slow) timeframe.
Townhouses also offer most of the benefits of a detached house (e.g., a garden) with lower maintenance.
