Q3 Housing Market Insight

Population growth and urbanisation are two key Asia Pacific mega trends driving activity in the real estate sector. Understanding these fundamentals is essential to appreciate what is driving supply.

Record low rental vacancies are sustaining rental yields across the eastern seaboard capital city markets for well located, differentiated inner city apartment investor product.

Affordability also remains a key driver of inner city apartments. Owner occupiers are increasingly seeking to live closer to jobs, infrastructure and amenity that is resulting in a generational shift in living preferences. Further compounding the increase in demand for apartment living is the fact that on balance, over 50% of population growth is accounted for by positive net migration; new residents highly accustomed to apartment living. Supply continues to be absorbed despite persistent speculation regarding potential oversupply issues.

Despite the recent higher levels of activity in apartment developments, it must be noted the low base of apartment supply we are building from. Table 1 illustrates this point by comparing the percentage of Melbourne, Sydney and Brisbane residents living in buildings four levels or higher with other global cities.

Foreign investor purchases increase despite the threat of a slowdown in China and a potential impact on other Asia Pacific economies. In addition to the recent AUD devaluation, Australia’s strong property rights, freehold title and transparent markets provide significant security and reflect longer term investment drivers, likely to drive continued foreign sales from China, Singapore and Malaysia, in particular.

Off the back of these strong fundamentals, MaxCap remains cautious in a global low growth environment with new paradigms in play. MaxCap continues to monitor the market closely in order to synthesise our market insight and deliver strong risk-adjusted opportunities via a highly selective credit and risk management process.