Covid 19...The Demise of Apartment Living?

There is that expression, if you say something for long enough, you’ll probably be proved right. This probably has more relevance to economists than most other professions, though I suspect they all have their nuances. Certainly the pandemic sweeping the world has meant that many of the things that are held as “foundations” are being questioned, apartment living is certainly one of them. So what has fundamentally changed and are these temporary or longer term issues?

There has been a narrative that the dream of living close to work (usually the CBD or inner city) or educational institutions is no longer valid and that telecommuting is the new black. The concept of office work hasn’t changed, though the ability to work from home has. In typically extreme “ends of the spectrum” arguments which society or social media tends to perpetuate, it is highly unlikely the majority of the white-collar workforce will end up at home five days of the week. There are very good reasons why this shouldn’t occur which relate to mental health, domestic violence and loneliness. Some may also argue that working remotely can inhibit creativity because a zoom meeting is not the same as a face to face conversation where something can be more easily explained and demonstrated in a human to human interface with no electronic intermediary. Living close to work is still highly desirable for many people and an apartment is often the most affordable way of achieving this. Living close to work though is very different to working from home and many people need the separation of work and home.

Education in its tertiary form is in terrible circumstances right now. Whilst I can’t state categorically, I would suggest that almost every campus in Australia is closed and the capacity to service international students is highly concerning. Much of Australia’s end users are international students so vacancy rates around these institutions will continue to suffer. Is this a short-term problem or one of a longer trend that will have far reaching implications for student accommodation and apartment buildings geared to this sector? The likely outcome is that international students will be back in numbers in 2021 as they go through a quarantine process before starting or continuing their studies. If you’re coming to study for a year, what is two weeks quarantine in the broad scheme of things? In the meantime, vacancy rates will increase as will the pressure on weekly rents. This would appear to be a short term anomaly rather than a systemic outcome. Expect valuers to be hard on these property types.

For certain segments of the population that has allegedly been constantly bemoaning the issue of home maintenance, mowing the lawns etc, all of a sudden we want to spend our weekends in the garden…said no 21 year old ever. Okay maybe some did, but the point is that the pandemic has not made the part of the population that didn’t want the hassles of a garden and home maintenance all of a sudden want a house on a traditional lot. Property works largely on life stages. To suggest that apartment living is no longer desirable is to not only discount the lifestyle choices made by certain demographic cohorts, it is also a failing to acknowledge the vast steps forward that developers and architects have made in creating truly liveable destinations with far wider appeal.

There is one thing that higher density living has very successfully achieved in the last two decades, but improved significantly in the last decade, and that is creating a very strong café and dining culture that only really existed in substance during business hours. Cities and inner-city suburbs now provide a lifestyle that is the envy of many in the middle and outer ring suburbs. Combined with this has been significant government expenditure in beautifying and linking these suburbs with quality walking and cycling trails that are separate to the road network. Gradually these important pieces of infrastructure are making their way further out to the middle ring suburbs. Whilst the desire to live in an apartment is not for all, it does allow a greater share of the population to enjoy a natural and/or man-made feature. Whether this is the harbour front in Sydney or the beaches of Surfers Paradise, apartments allow connectivity for the majority of people that could not be afforded any other way. In turn this really does provide significant stimulation of the local economy, again providing more liveable places.

The concept of self-isolation as Australian’s have recently experienced was very different to the lock down seen in many other countries. However, the argument perpetuated was that having a backyard somehow made it superior to the community space that existed outside of many apartments. If Australia had had a true lock down, then yes, the argument of a backyard holds more merit, particularly if you have a pet as many apartment buildings now allow. Quite simply though, the public spaces around density were never more loved, even more so whilst school was conducted from home. Many people walked out of their apartments to curated parklands, cycleways and gardens, something that can not be said for many homes in middle and outer ring established suburbs. Conversely, many master planned communities do offer similar lifestyle benefits. The dumbbell effect of where money is spent, both by the public sector and developers.

However this is where the apartment argument starts to become more difficult to prosecute. If people are forced to work from home and children are required to educate from home, the strain on many apartment designs can become problematic. By default, apartments and houses were never designed to be places of economic enterprise, nor were they designed to replace class rooms and playgrounds. Houses may prove easier to transition to this temporary need by account of their size, but in reality, a pandemic is a temporary environment from which society must operate, not a new norm as is constantly bantered about. Having stated that, many purchasers will now look at apartments through a different lens and wonder whether a study nook is really adequate for extended periods of working from home. Just as the press often writes about the death of the McMansion, the pandemic may actually have purchasers seeking larger dwellings as they adopt a doomsday prepper mentality. Lifestyle is important and size does matter if you are required to work and educate from home for extended periods of time.

The longer these changes continue, the more enduring the outcomes are likely to be. Though I would ask you to think, if a vaccine was discovered, manufactured and given to the population next week, what will have really changed and how quickly would we revert back to old habits? There is research that partially answers that question. Phillippa Lally, a health psychology researcher at the University College of London whose research discovered that “On average, it takes more than 2 months before a new behaviour becomes automatic, 66 days to be exact. And how long it takes a new habit to form can vary widely depending on the behaviour, the person, and the circumstances.” Lally went on to suggest that it can take anywhere from 18 days to 254 days for people to form a new habit. For those new habits to form, they need to be constant, something that is anything but in the current environment.

So is this the demise of the apartment building and higher density living? Hardly. And if we are having this conversation in 12 months’ time, you can be assured that this will be the furthest thing from our mind as we battle more outbreaks, failing economies and as yet unseen crisis.

Matthew Gross | Director