Demand for off-the-plan apartments in the central suburbs of Australia’s major cities has risen sharply, as a result of increased attention from aspiring owner-occupiers and the latest cut in interest rates.

Middle-class property buyers are finding that while the prices for houses in the central suburbs of Sydney and Melbourne are beyond their budgets, off-the-plan apartments can provide affordable yet genteel dwelling spaces which are both architecturally stylish and equipped with excellent fittings.

Peter Chittenden, residential managing director for Colliers International, told AFR that one and two-bedroom apartments remain the strongest sellers, with a trend toward two-bedroom apartments in the $600,000 to $700,000 property range.

“The local and offshore Asian market is still aggressive, but there are more owner-occupiers buying two-bedroom apartments now than last year,” Chittenden said.

According to CBRE residential chairman Justin Brown, other key factors leading to an increase in demand for centrally situated off-the-plan apartments include the recent cut in interest rates and low stock levels and rental vacancies.

Demand is strongest in Sydney and Melbourne due to their large size and high population densities.

Legacy Property sold 90 apartments at their Bondi Junction project in Sydney just last week, while Oliver Hume Apartments reports strong demand from owner-occupiers in their late twenties and thirties who are willing to spend between $400,000 and $650,000 to live in places of their own in those older suburbs closer to the city such as Carlton and Collingwood.

Developers of luxury apartments also report strong sales, with Malaysia’s SP Setia selling around a third of its St Kilda Road project’s 332 apartments, as well as both penthouses, in the weeks leading up to its launch.

Evolve Development’s Ashley Williams said demand in Melbourne for off-the-plan apartments has been riding strong for the past several years. Evolve’s 353-unit project on Southbank sold out in the four months after launching in February 2010.

“We started to see buyers returning in 2009, it was after the global financial crisis and interest rates were low,” Williams said. “That’s what gave us the confidence to go ahead with a bigger project.”