While the cost of standalone and semi-attached houses in Melbourne continue to skyrocket, apartments have only had minor price changes over the past 12 months. Further, as houses continue to become a rarity, apartment supply is steadily increasing. Many people will have to start considering apartments if they wish to live in the inner city.
For people used to living with a backyard and having adequate distance from their neighbours, moving into a high-rise apartment building is out of the question. But there is another option: boutique apartments, usually between 8 and 40 apartments spread over no more than four levels, typically built in the 1960s to 1980s. They offer a middle ground between the freedom and privacy of standalone houses, and the affordable yet crowded environment of high rise towers.
If you are looking to buy in a smaller apartment building, some of the main concerns are in the internal size, whether it has a balcony and carspace, and its floor level, especially because most older buildings only have stairs.
Hence, the factors considered for this study included the amount of indoor and outdoor space, which floor the apartment is on and whether space for a car is included or not. The suburb was also included as a control variable.
The first surprise is that whether an apartment was located on the ground floor, the top level or anywhere in between had no significant impact on the sale price.
The percent impact of a one unit change (i.e. one extra square metre of space, or the addition of a car space) are shown below:
|Factor||% Price Increase|
Not surprisingly, both additional indoor and outdoor space will increase the average price of an apartment, with each additional square metre of indoor space adding about 1.4% to the price, and each square metre of balcony (or garden if on the ground floor) adding about 0.4%.
For example, if an apartment is valued at $500,000, an apartment that is otherwise identical, but has a living area that is 10m2 larger, would be worth about $570,000. If the same apartment instead had a 10m2 larger balcony, it would be worth $520,000.
The factor that is slightly more surprising is how much value a car space can add: on average, we expect apartments that come with private parking to sell for 10% more than those that do not.
Some of this effect may be due to many newer apartments being sold without a car park, and street parking becoming more restricted. Both of these appear to increase the value of having a car space with an apartment. This goes to show just how valuable off-street parking in inner Melbourne has become.