Veteran architect Tom Jordan was surprised by the response to a new project in Ivanhoe: the demand by "empty nesters" for bigger, three-bedroom apartments was overwhelming.
"It's a turning point in the market from our point of view," said Mr Jordan, managing director of Hayball.
The brief from the client, Kokoda Property, for its Evergreen project was to target investors. "As soon as it went to market, the first thing to sell was the small number of three-bedroom apartments. Clients were saying, 'Where are the larger apartments?' " Mr Jordan told Business Day.
"We had to do a substantial redesign to satisfy demand, so it's nearly 50 per cent owner-occupied, which is very high – substantially higher than they anticipated. The balance between smaller and larger apartments was completely turned on its head."
Hayball director Ann Lau, who had a lead design role in the project, said the buyers were swapping a house for an apartment. "They have one bedroom, one media room and a spare, guest bedroom. They have a big outdoor terrace for entertaining, and keep local networks," she said.
A report from research firm Urbis, based on the 2011 Census, found that there were 4.2 million in the over-60 age bracket. By 2026, there would be 6.6 million – a 57 per cent increase in 15 years. "This has significant implications for property and public policy," Urbis said.
Older singles were more likely to embrace alternatives to the detached home than couples; 29 per cent of singles now lived in high- or medium-density apartments compared with 8.3 per cent in retirement villages, while 60 per cent still lived in detached houses.
However, the national executive director of Charter Keck Cramer, Robert Papaleo, doubted that empty nesters were a major driver of demand just yet.
"I agree the market is continuing to mature and some apartments are being purchased by local empty nesters," he said. It was usually a selective product in a particular suburb. "All the evidence we have points to the great majority of demand being expressed by investors – and generally for smaller apartments."
Mr Jordan agreed that the market in Melbourne was very localised. "Owner-occupiers typically buy in the area they are downsizing from. There is some competition in Ivanhoe, but there is depth in the market to support the sales in this project," he said.
"It's easier where house values are high; they can release more equity in the transaction, swapping a house for an apartment. Out on the fringe where house prices are lower, that equation does not work as well. There is not the same financial metric."
Mr Jordan acknowledged that traditional European apartments were big, but Australia's high construction costs by world standards – which were related to labour rates – were one reason why this trend had not happened here.
"That drives apartment prices down, otherwise they are unaffordable. Having said that, owner-occupiers in these locations are prepared to pay for larger apartments when they can get them," he said.
