High-rise apartments lose their lustre

By Grace Ormsby 01 September 2020 | 1 minute read

COVID-19 is the “final nail in the coffin” for the financial performance of high-rise apartments as an investment piece, according to a property analyst.

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Propertyology’s Simon Pressley is predicting demand for inner-city apartments to significantly diminish in the future, as the “fried egg” town planning model falls out of favour with the workforce.

Given the intense restrictions COVID-19 has placed on both lifestyles and earning capacities, Mr Pressley has conceded that “before too long, there will be a big enough critical mass of people who will work and/or live at a different address to cause a structural shift in property markets”.

The traditional fried egg model represents a CBD filled with large volumes of offices surrounded by retail and high-density apartments as the yolk, while the egg white is suburban living.

Mr Pressley believes this will soon be replaced by a scrambled egg model: Post-COVID inner-ring property owners will want to pursue smaller mortgages without compromising dwelling quality.

He said finance and insurance workers, engineers, lawyers, accountants, IT workers and other knowledge-based employees “have already had long enough to test and measure the work-from-home business model”.

“People will disburse in a different pattern. A germ does not diminish Australia’s total demand for shelter, but it will significantly influence where people choose to take shelter,” he added.

Driving forces of such a “scramble” include more manageable mortgages, lower-density locations that are less susceptible to future lockdowns, regional relocation and the trend to work from home.

It’s why Propertyology considers COVID-19 “the final nail in the coffin for the financial performance of high-rise apartments”.

Mr Pressley said the asset class was already becoming problematic pre-pandemic – “and now the future is uncertain for workers in hotels, restaurants and hospitality that normally service international visitors”.

“Ditto, the airline industry and international students. Many of this demographic are part of the yolk of the egg, renting an inner-city apartment.”

About the author

Grace Ormsby

Grace Ormsby

Grace is a journalist across Momentum property and investment brands. Grace joined Momentum Media in 2018, bringing with her a Bachelor of Laws and a Bachelor of Communication (Journalism) from the University of Newcastle. She’s passionate about delivering easy to digest information and content relevant to her key audiences and... Read more

High-rise apartments lose their lustre
High-rise apartments lose their lustre
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