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Bad news for Aussies wanting an apartment

Developers are catering to a new super elite trend in apartments for rich buyers, putting homes further out of reach for regular Aussies.

Mega rich Australians are stuck inside the country amid border closures so instead of looking further afield, they’re looking up.

A new report shows that purchases of luxury apartments, particularly plush penthouses, have taken off over the last 18 months during the Covid-19 pandemic.

Super-prime apartments — usually selling for at least $10 million — are being sold eight times more than in the first half of this year compared to any other time.

Property consultancy firm Knight Frank released the report on Thursday, which found that “rightsizing” — a type of downsizing where cashed up homeowners trade in a mansion for a high-end flat — is becoming increasingly common.

The trend is bad news for average Australians hoping to get a foot in the property market door.

To accommodate the growing needs of Australia’s ultra wealthy population, developers are creating more and more luxury apartments — leaving most aspiring homeowners out in the cold.

“Across the development pipeline forecast, developers are increasingly catering to the specific demands of rightsizers – namely, including more three-bedroom configured luxury apartments within their projects,” the report stated.

Over the next three years, three-bedroom luxury flats will account for 32 per cent of new developments, compared to just 21 per cent of projects built in 2018.

These apartments go for $10 million or in Sydney and Melbourne and $7 million plus across Brisbane, Perth and the Gold Coast — well out of the price range of an ordinary Aussie.

Last week, Australia’s property market surpassed $9.1 trillion in terms of its value.

National house values reached an average of $719,209 over September, while units are sitting at $586,993 — a lot lower than the average cost of a prestige apartment.

What’s more, not only are developers catering to this elite group, but the report predicted that apartments are going to be harder to come by as well.

“Concerningly, the pipeline of new apartments in prime regions around Australia will fall by 39 per cent over the next three years,” noted the report’s authors.

Purchases of plush apartments have been turbocharged by the pandemic, especially in the past six months.

There was only an average of 8.7 prestige apartment sales transactions per year from 2011 to 2020, compared to 67 purchases so far in this year alone.

A whopping 70 per cent of those sales came from one apartment block in Sydney — Crown Residences at One Barangaroo.

On Thursday, coinciding with the same day the report was released, South Australia’s most expensive apartment ever was listed on the property market.

The penthouse of the 37-storey Market Square tower in the Adelaide CBD is selling for an eye-watering $10 million.

For that amount of money, you get four bedrooms, four bathrooms and panoramic views with the company writing it is “comparable to penthouses in Paris and New York City”.

The $10 million substantially beats the state record, which was previously $5.5 million for a Realm Adelaide penthouse.

The report’s authors have attributed the booming prestige apartment industry to three main reasons.

Firstly, Australians want low-maintenance homes but still with a lot of space, described as “house-like proportions for entertaining”. A penthouse, or at least a very large and luxurious apartment, meets this criteria.

On top of that, those seeking a luxury residence want one that can be easily locked-up and cared for when they jet off for long periods of international travel again next year.

The final reason for the sudden boom was holidays. Australians are increasingly buying a “co-primary home”, where the second (holiday) home is almost equal in every way to their main residence, especially in terms of comfort.

As demand has increased, so have prices. Luxury apartment prices in high-rise projects have risen more than 30 per cent across the major cities since June 2015, the Knight Frank research found.

Knight Frank’s Head of Residential Research, Michelle Ciesielski said: “The shortage of suitable product, particularly at the top end of the market where rightsizers play, has been exacerbated by developers unable to easily secure sites in prime locations adding to the highly pressurised buying environment across Australian cities.”

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