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Pent-up demand for medium- and high-density living has driven prices of inner-city properties above the national median, according to Luci Ellis, Reserve Bank of Australia head of financial stability.
Speaking at an urban planning seminar at Sydney University, Ms Ellis said Australia is still struggling to keep up with demand, unlike the US where market forces exposed oversupply in housing markets, which subsequently crashed.
According to Ms Ellis, there is an assumption in Australia that more housing is needed to accommodate the people who are arriving from overseas.
“Where do students want to live, and where are recent graduates likely to want to live?” Ms Ellis asked.
“Well, it’s not big family homes on the fringe. It’s apartments in the inner-city areas near the universities.
“There’s a consequence to that, though – the premium to being closer has increased. There’s always a premium to being close, but it’s got larger.”
Director of Belle Property in Sydney’s inner-city suburb of Glebe Mark Tooth said there is huge demand for properties around the inner-city given the current state of home loans and sweeteners like no stamp duty for first home buyers.
Mr Tooth said these factors are driving the demand.
“Post-graduate sales and single-person households who are enjoying a certain socio-economic level are the biggest growth industry, especially for studio or one-bedroom properties, and there is a temporary oversupply,” Mr Tooth said.
“The demand is driven by people already working in the city, not students. Students are happy to stay in share houses like terraces or on campus ... around here the inner-city studio apartments are well presented, in good condition and not the old ‘studio’ type.
“Although, we are seeing some average- to moderately-priced investments being bought by mum-and-dad super funds and we see the occasional parents buying property to give their kids a start.”
LJ Hooker Glebe sales executive John Yannakis said he does see the occasional family from overseas looking to buy a property for their son or daughter but stressed that it's not a majority.
“A lot are owner-occupiers and we do get young professionals, families with one child or possibly two, but generally I wouldn’t say there is an oversupply, but a good opportunity to sell at auction or prior to,” he said.
