Urbis Think Tank
Is there a demand for apartments in regional cities?
In most regional cities, land is cheap and plentiful. As a result, the development economics make apartment living a less viable prospect in regional cities than in the inner suburbs of our state capitals.
The stock of higher density dwellings, or apartment living is far les prevalent in regional cities.
So, does this also indicate that higher density living will become more prevalent among the larger regional cities?
Establishing demand for apartments in established cities is hard, particularly in areas where no market currently exists. Regional towns are even more difficult to assess. We recently conducted an analysis in the Victorian city of Bendigo, which has had strong population growth over the past decade, and is likely to continue at an even greater rate. Does this create the conditions for more higher density living?
The answer requires consideration of a number of factors:
- Is the propensity to live in apartments significantly below benchmark regional towns? What are the attributes of the individual site? Apartment dwellers typically want to be near amenity, they want safety and activity, so apartments won’t work on the fringe of a regional town.
- Specific market segments influence apartment demand – many regional towns like Bendigo benefit from a more transient population that may be more likely to accept higher density living over a short period. Hospitals, education and the defence force are key employers of temporary population in regional towns.
- What price point can the apartments be delivered at? This needs to be at a discount to the house price in the area.
Land remains very cheap in Bendigo – the median price for land in Bendigo is 24% below that in Ballarat, and 12% below that in Wodonga. This is one of the reasons that Bendigo has a low proportion of apartments compared to other large regional cities.
Opportunities for higher density living in Australia’s regional towns are likely to arise from specific short term (particularly mining) employment. In Victoria, at least, government commitment to redevelopment of the regions (Places Victoria in Wodonga) may also lead to some increased density. The development economics of apartment living in regional towns are unlikely to give rise to an apartment boom in our regional cities. Most apartment living that does eventuate is likely to be opportunistic developments that capture specific market segments (e.g. mining workers in Karratha) or associated with government led redevelopment initiatives such as Wodonga in Victoria.