Kensington buyers turn to bigger apartments near CBD

Completed larger apartments near Sydney's CBD are emerging as an alternative to houses for buyers in Kensington. The shift comes as the gap between the suburb's median house price and median three-bedroom apartment price has widened to more than AUD $2 million.

In Kensington, the median house price is AUD $3.8 million, compared with AUD $1.618 million for a three-bedroom apartment. That gap is shaping decisions for buyers who want more space without moving far from inner-city areas.

Newly completed stock remains limited, particularly larger apartments that buyers can inspect and occupy immediately. REA listings in the Kensington area show only a finite number of three-bedroom apartments, new and existing, on the market.

TOGA's The Kensington, a completed development in the suburb, is among the small number of projects close to the city offering larger two and three-bedroom homes. More than 75 per cent of its residences are two and three-bedroom apartments.

The buyer profile points to demand from owner-occupiers in nearby areas. According to the developer, 44.4 per cent of purchasers already live in Kensington or the surrounding Eastern Suburbs and inner-city catchment, including 10 buyers from Randwick, seven from Kensington and five from Maroubra.

Enquiries have come from downsizers, young families, professionals and investors. Available homes are priced from AUD $975,000 for a one-bedroom apartment, AUD $1.34 million for a two-bedroom apartment, AUD $1.495 million for a two-bedroom apartment with a study, AUD $1.575 million for SOHO terrace residences, and AUD $1.795 million for three-bedroom residences.

Dennis Vertzayias, Partner and Director at Laver Residential Projects, said the widening gap between houses and apartments was changing the options buyers consider when looking for more space.

"For a buyer who wants to stay in an established suburb like Kensington, the jump from an apartment into a house can now be more than $2 million. That is forcing people to think differently about what their next home looks like.

"For some, the compromise is no longer necessarily location - it can be property type. A larger apartment can provide the additional bedrooms and living space buyers are looking for without requiring them to move significantly further from the city.

"We're also seeing value in being able to walk through the actual home before making a decision. Buyers can see the natural light, outlook, room sizes and finishes, understand the building and surrounding neighbourhood, and know exactly what they are purchasing," Vertzayias said.

Price pressure

The local trend mirrors broader national data on housing affordability. PropTrack figures show unit prices rose 5.1 per cent over the past year, compared with 3.6 per cent for houses.

That relative price performance comes as buyers contend with borrowing constraints and high entry costs for detached homes in established suburbs. In inner Sydney markets, the gap between buying a house and buying a larger apartment has become large enough to change the type of home some households consider.

At the same time, new supply faces economic constraints. Analysis by the Centre for International Economics estimated the cost of delivering a typical mid-rise apartment in Sydney at more than AUD $1 million, while the NSW Productivity and Equality Commission found fewer than one in four sites identified in existing council housing plans were commercially viable for development.

Those pressures help explain why completed larger apartments close to the CBD remain relatively scarce. For buyers, the appeal of an already finished project is that it removes uncertainty around final layouts, outlook and completion timelines.

Anthony Falas, Executive General Manager of Sales at TOGA, said the project was intended to meet demand from buyers seeking more room without leaving established neighbourhoods.

"There is a significant group of buyers who don't want to choose between having more space and staying close to the city.

"They want an extra bedroom, room to work from home and spaces that support everyday life, but they also want to remain connected to work, transport, education and the neighbourhoods they know.

"The Kensington gives them another option. More than three-quarters of the residences are two and three-bedroom homes, the development is complete, and buyers can inspect the exact apartment they are purchasing and move in now," Falas said.

The development is about 4km from Sydney's CBD and is close to light rail and bus connections, as well as the University of New South Wales, Centennial Park, and the Randwick health and education precinct. Around 50 apartments remain available.