Australia is rapidly moving towards an era of apartment living, with affordability constraints and demand pressures driving more buyers towards high-density housing.
For mortgage lenders and borrowers, this shift presents both opportunities and challenges in financing apartment purchases.
Real estate fund manager Qualitas reports that while apartments still make up a smaller proportion of Australia’s housing stock compared to global cities, demand is steadily increasing.
Managing director Andrew Schwartz suggests that if this demand continues, apartment construction could triple to 75,000 new dwellings per year.
However, financing challenges for developers and capacity constraints within the construction sector remain key barriers.
Schwartz notes that new-build apartment prices have risen by 15% to 20% to remain financially viable for developers.
Despite this, buyer demand remains strong. For homebuyers, rising construction costs mean that securing off-the-plan financing and loan pre-approvals will become even more critical.
The biggest challenge, according to Schwartz, is the construction industry’s ability to meet demand.
In the 12 months to September 2024, the number of new housing starts—including apartments, townhouses, and semi-detached homes—totaled 59,728, almost half of previous years’ levels.
Sydney and Brisbane are facing the most significant hurdles, with labour shortages delaying apartment projects.
With around half of Sydney’s housing stock now consisting of apartments, lenders must adapt mortgage products to reflect the growing demand for high-density housing.
Loan structures, borrowing criteria, and risk assessments for apartment purchases—especially off-the-plan and high-rise developments—will play an increasingly important role in mortgage lending strategies.
As apartment living becomes a more prominent feature of Australia’s property market, borrowers should consider loan flexibility, deposit requirements, and financing options tailored for high-density properties to ensure a smooth home-buying process.
