Can inner city apartments save us from sprawl?

Here’s compelling evidence that inner city apartments are not substitutes for fringe development despite oft-repeated claims to the contrary.

The Age reported yesterday that the average size of new two-bedroom apartments under construction in Melbourne is just 73 m2, while the average size of one-bedroom apartments is 51 m2 and studio apartments 34 m2.

SEE apartments, Claremont St, South Yarra

More than three quarters of the 5,600 units currently being built are located in central areas, mostly in the Melbourne, Stonnington and Yarra municipalities. A spokesperson from property group Oliver Hulme says that the median size of apartments in the inner municipalities is no smaller than those in outer suburbs.

I must say I’m staggered by how little space you get for your money. According to the report, the entry-level median price for newly built two-bedroom apartments is around $530,000. Corresponding prices for one-bedroom and studio apartments are $379,000 and $302,500 respectively. It seems inner city buyers subscribe strongly to the “location, location, location” maxim.

In contrast, the median house and land package in Melbourne’s outer suburban growth areas costs around $383,500 and the median dwelling size is 219 m2. It’s even cheaper in Cardinia in Melbourne’s outer South East, where the median dwelling is 186 m2 and together with land costs $334,500 on average.

Clearly the inner city and the outer suburban growth areas are entirely different markets! The average size of apartments is probably reduced by the current high rate of social housing construction but I doubt that’s significant enough to explain the enormous difference between the two markets.

SEE apartments, Claremont St, South Yarra

Apartment construction in the inner city is primarily driven by one and two person households without dependents. The growth areas on the other hand are driven by families (whose average size appears to be increasing).

The fact is the latter households simply cannot afford the inner city even if we assume they aspire to it ( which I don’t – I expect most of them prefer garages to galleries).

As I’ve argued before, there are good reasons to promote increased densities in established suburbs without resorting to the fiction that inner city redevelopment will reduce sprawl. Those reasons relate to improving affordability and housing choice for Melburnites who want to live in more accessible locations than the growth areas.

I suspect that a significant proportion of new growth area settlers would happily live in a more central location if a suitable compromise could be found on space and price. However that compromise is much more likely to be realised in the established parts of the existing outer suburbs and possibly some parts of the middle ring suburbs than in the inner city.

7 Comments on “Can inner city apartments save us from sprawl?”

  1. TomD says:

    Possibly no aspect of Australian housing construction exposes the incessant greed of Australia’s developers more than their approach to building apartments and units.

    Not only are they so frequently totally stingy with the provision of overall floor space, but many even feature outrageously low ceilings! Maybe this allows them to fit more levels within the building height restrictions … nothing would surprise me in terms of their total obsession with maximum price and minimum delivery.

    A traditional further manifestation of their gluttony and preference for personal profits at the expense of owner satisfaction, used to be the equally appalling amount of space given over to any token hanging external balconies they added to these apartments. Not even enough room to swing a rat normally, although there are some signs of improvement here. Which thankfully also helps with the external aesthetics sometimes as well.

    Your are absolutely right about the lack of value for money Alan – the prices are a total ripoff!

    An interesting link to the history of unit construction and their distinctive contemptuous Aussie approach can be found here –

  2. Alan Davies says:

    Seems to be something you feel strongly about Tom! Actually I wasn’t commenting on the value for money angle so much as on how relatively unimportant space is compared to location for these buyers. The average size of a studio apartment is slightly smaller than the minimum accepted size for a five star hotel room! Still, the space per person would be lavish compared to that available to the working class families who lived in the terraces of Fitzroy 70 or so years ago.

  3. Michael says:

    I have often been puzzled by what effect construction costs have on development trends. It hardly needs restating because I never have data on anything – I don’t have any data on this, but from my observations there have been tremendous productivity improvements in construction. I assume this productivity saving has been absorbed in higher labour costs, possibly larger house sizes for detached houses, higher materials costs and going to two storeys. Maybe the prices of buildings have more or less stayed stable?

    I would presume that competition amongst builders (excuse my naivety) would mean that oversized profits weren’t possible and that the prices for apartments followed the costs of building them? Unless the market isn’t efficient or there are other barriers preventing entry into the market?

    This is getting a bit off topic, but I do wonder what percentage of home buyers think that the house they end up buying represents their revealed preference for building given that location probably does come first for many and only a tiny percentage of home buyers can afford to have homes designed for them.

  4. […] The units are very small and therefore relatively affordable (although that’s not the same as value for money!). Around three quarters are proposed to be studios and one bedroom apartments, with a minimum internal floor area of 40 sq m and 44 sq m respectively. The remainder are two bedroom units (minimum 65 sq m). These sizes are around the average for inner suburban apartments – see here. […]

  5. […] trouble is that even small (73 m2) entry-level two bedroom apartments in the inner suburbs average $530,000. They are neither affordable enough nor large enough to provide an alternative to the fringe for […]

  6. I’m researching on various ways to improve tenant relationship vis a vis management companies. At the moment, a tenant find an apartment for rent and the relationship stops there. I’m curious to know what will happen if the apartment locator is able to develop a profound relationship with the management company which he can relate to the future tenant. Any ideas or suggestions will be appreciated.

  7. […] are 85 m2 and two bedroom apartments are 115 m2. That’s much higher than the average in the inner city and even projects at suburban Doncaster — like the Madison, The Pinnacle and The Arcadia […]

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