The State of the Sydney Apartment Market

With the Sydney housing market moving full steam ahead, what’s happening to the Sydney apartment market?

Valuers Charter Keck Kramer (CKK) recently released their State of the Market (Apartments) for metropolitan Sydney which suggests a looming undersupply of new apartments which will lead to lower vacancy rates, higher prices for new apartments, and in turn the continuing to surge in values of well located established Sydney apartments.

Underpinned by continued overseas and interstate migration, metropolitan Sydney and according to CKK this requires about 41,000 additional dwellings per annum to accommodate its current level of growth.

To meet this demand the delivery of new apartment projects is vital, particularly as affordability pressures, demographic trends, changing household types and lifestyle preferences drives the need for more diverse housing options.

And, in general, investors buy many of these new apartments – back in 2014-5 investors lending accounted for more than 50% of all property purchases in Sydney.

Investor purchases of “off the plan apartments” reach peak levels in 2015 and 16, but this was followed by a collapse in the investor apartment market as the welcome mat was pulled out from under the many foreign investors purchasing these properties.

At the same time local investors found it more difficult due to the introduction of more stringent lending practices, new APRA rules and directives and more recently fears about building standards given all the media publicity about a number of high-profile buildings with significant structural problems.

But things have changed

Over the last few years, an apartment over supply and other regulatory and non-regulatory factors have resulted in the collapse of investor demand for Sydney “off the plan” apartments.

The reduced sales volumes have made it more difficult for developers to achieve the pre-sale hurdles required by the banks to finance developments, and a few new projects are on the drawing board.

This means that undersupply of apartments is looming.

Charter Keck Kramer report that in 2019, only 25,500 apartments were completed in metropolitan Sydney in 2019.

This represents a 17% in decrease from the record 30,900 apartments completed in 2018 and suggests that the oversupply of the better quality apartments on the market will soon disappear.

The looming undersupply of new projects will lead to lower vacancy rates, rental growth and eventually property price growth of these new apartments and in turn will help fuel increase price growth of well located establish a purpose in Sydney.

But be careful –many of the new Legoland apartment high-rise towers will always remain secondary quality and become the slums of the future – steer clear of these.

Charter Keck Kramer project that 20,700 new apartments will be completed in 2020.

More than half of these will be in the middle region of Sydney and approximately 25% of these new apartments will be completed in Sydney is at a regi

The number of Relations in 2021 and 2022 expected to decrease significantly again confirming a looming under supply.

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from Property UpdateProperty Update https://propertyupdate.com.au/the-state-of-the-sydney-apartment-market/