# The Rise and Fall of Australia's Apartment Construction Renaissance
There was a remarkable boom in apartment construction during the mid-2010s in Australia. I suspect this phenomenon accounts for the superior capital productivity that characterized the construction industry during that period.
Apartment construction, in contrast to single-family residential development, tends to be dominated by larger firms who possess both the inclination and resources to invest in sophisticated software systems and superior management practices. Home construction, by comparison, remains the province of smaller enterprises that exhibit, on average, considerably inferior managerial capabilities.
This raises intriguing questions about the underlying forces that precipitated this apartment construction renaissance. What particular circumstances converged to create such favorable conditions for higher-density residential development? And perhaps more significantly, what factors contributed to the subsequent decline of this boom, given its apparent benefits for industrial productivity and efficiency?
I agree that apartment construction is more capital intensive and done by larger firms than houses, and will have higher productivity. Unfortunately the ABS data does not allow that level of analysis.
The apartment boom in the mid-2010s was driven by two factors: the Reserve Bank lowered interest rates to boost residential construction as the economy adjusted to the end of the mining boom; and there was a large increase in overseas capital invested in real estate development, particularly from Chinese developers.
The boom was running out of steam by the time the pandemic hit, and the high interest rates of the last few years have reduced the commencement of new developments.
# The Rise and Fall of Australia's Apartment Construction Renaissance
There was a remarkable boom in apartment construction during the mid-2010s in Australia. I suspect this phenomenon accounts for the superior capital productivity that characterized the construction industry during that period.
Apartment construction, in contrast to single-family residential development, tends to be dominated by larger firms who possess both the inclination and resources to invest in sophisticated software systems and superior management practices. Home construction, by comparison, remains the province of smaller enterprises that exhibit, on average, considerably inferior managerial capabilities.
This raises intriguing questions about the underlying forces that precipitated this apartment construction renaissance. What particular circumstances converged to create such favorable conditions for higher-density residential development? And perhaps more significantly, what factors contributed to the subsequent decline of this boom, given its apparent benefits for industrial productivity and efficiency?
Thanks for this thoughtful comment.
I agree that apartment construction is more capital intensive and done by larger firms than houses, and will have higher productivity. Unfortunately the ABS data does not allow that level of analysis.
The apartment boom in the mid-2010s was driven by two factors: the Reserve Bank lowered interest rates to boost residential construction as the economy adjusted to the end of the mining boom; and there was a large increase in overseas capital invested in real estate development, particularly from Chinese developers.
The boom was running out of steam by the time the pandemic hit, and the high interest rates of the last few years have reduced the commencement of new developments.