The End of the Share House

I have a real soft spot for the classic sharehouse.

When I started this blog, back in 2010, I was living in a big weird house in Melbourne’s North Fitzroy. Scalding in summer, freezing in winter, the place was enormous, and yet had no street access. You could only get to it from a little cobbled laneway. It was perfect.

That seemed like a rite of passage at the time. The rickety rambling sharehouse is part of our shared culture, immortalised in books like Monkey Grip and films like He Died with a Felafel in his Hand.

But the future of the sharehouse is in doubt. The property market in the inner areas where young people mostly want to live is in flux. Big old houses are almost never just sitting round un-renovated these days. They can be made into multi million dollar luxury homes, their owners are doing so.

Take this home in “gritty” inner-city Fitzroy. I guarantee that if a 2nd-year arts student lives there, it’s at home with mum and dad.

former sharehouse

The decline of the classic sharehouse is only going to accelerate if the apartment market capitulates. And there are plenty of signs that might happen.

Rents in Australia are surprisingly low compared to property prices, meaning the yield on the investment is not especially high.

RBA shows yields are low.

This is largely driven by amazing property price appreciation.  That same inflation has pushed developers to try to increase supply of inner city homes.

Building more houses in the inner city is hard, obviously, so they are building mostly apartments. The number of new apartment developments in Australia at the moment is a source of concern for our central bank. The head of financial stability singled out property developers for special attention just last week.

Apt warningIt seems likely apartment prices are going to stabilise or even fall. And soon.

When they do it will have all sorts of effects, some immediate and calamitous, others longer-term.  Big apartment towers in the inner city will become cheap accommodation. Perhaps even very cheap.

Which will be pretty much spell the end of the classic sharehouse. Why would the young – often working part-time – pay extra to live in a house when they could live in an apartment cheaply?

Ordinarily I would argue the apartment market and the house market are linked. That a fall in the prices of one will lead to a fall in the prices of the other. But the housing stock being produced in apartment buildings is often far different to the many bedroom places that would work as a share house. Many of the apartments produced in the last decade are truly tiny.

The myths and culture of the next generation will probably centre on a lifestyle where young people have no housemates at all.

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Thomas the Think Engine is the blog of a trained economist. It comes to you from Melbourne Australia.

3 thoughts on “The End of the Share House”

  1. After the Melbourne commercial office boom of the late 80s/early 90s, many big commercial tenants moved out of tired CBD accommodation and into new glamorous offices at lower prices than they had previously thought possible. It triggered a mini follow-up burst of building activity, whereby tired vacant commercial office buildings were updated and converted to other uses – serviced offices, boutique hotels, and the first wave of CBD residential apartments!

    I wouldn’t be surprised to see a similar pattern emerge when the end of the apartment boom arrives. Existing apartment owners will be able to upgrade to the newest buildings at low prices, leaving the older buildings vacant and ripe for refurbishment. Then canny developers will snap up the older apartments, and embark on a program of consolidation and refurbishment.

    My prediction is the end of this apartment boom will trigger the first wave of “city residences” – generous, 3 and 4 bedroom, family sized apartments fitted into the space of older buildings.

    Liked by 1 person

    1. > city residences” – generous, 3 and 4 bedroom, family sized apartments fitted into the space of older buildings.

      That would be awesome. But I guess I fear these little apartments will be less adaptable and less open to remodellign than old office space, which has generally open floorplans. I predict instead a new era of super cheap housing (ghettoish at the margins) in and around the CBD. Which could actually have some big positives for access to services among the disadvantaged.


  2. Here’s an example:
    555 Collins St, built 1975, currently vacant, 25,000 sqm floor area over 24 levels, 82 basement car parks, Likely price $60m
    Unable to get planning permission for a new tall tower, due to Yarra shading rules. At approximately 1000sqm per level, it’s an opportunity to retain and refurbish the building as a combination of quarter (250m), half (500m) and whole floor (1000m) very large apartments. All it takes is a savvy investor who can see the large apartment opportunity that is coming.

    Liked by 1 person

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