Sydney Apartment Market Insights

Sydney Apartment Market Insights

One of the most turbulent times in the Sydney residential development market since the early 2000s. Here are our views on the current state of play.

Current Market Climate

  • Full impact of the rising interest rates hasn’t been felt yet & with more rate rises predicted as a result of inflation, buyers remain conservative
  • Investor apartment demand has remained constrained, however confidence is building resulting from increased demand for rental accommodation
  • Owner occupier market (downsizers) targeting higher GR level “blue chip” suburbs remains solid and higher sale rates per sqm are being achieved
  • Cost pressures on apartments have arisen by the sharp increase in construction debt, labour & materials. As a result, little new stock is entering the pipeline

Apartment Value Trends

  • Apartment prices didn’t see as much growth post pandemic compared to detached houses
  • The relative affordability of apartments will support demand in an environment where borrowing capacity is constrained
  • Prices should remain stable if not increase as borrowing capacity will push more buyers into the apartment market
  • While many headwinds remain, existing dwelling prices have grown the past two months, but this likely reflects a low level of sale listings

Rental Market

  • Rents have rapidly increased over the last 12 months as cost-of-living pressures impact on borrowing power, pushing those unable to buy into the rental market
  • Asking rents are now above pre-covid levels in all markets with an overall increase average of 24% across Sydney over the last year
  • Vacancy rates across Sydney have hit 1% with many suburbs sub 1%
  • Post COVID 19 conditions saw the return and influx of overseas migration, particularly students needing temporary housing
  • The encouragement from the Chinese government of students returning to universities face to face skyrocketing rental demand

Site Land Values

  • Suburbs with GR under $10,000 p/sqm are struggling to preserve land values
  • Small sites (sub 50 apartments) in middle to outer ring suffering the greatest adjustment in residual land value, in some cases 30-40% reduction since 2021 in value to make projects feasible
  • Inner ring suburbs holding value, with many land owners unwilling to discount to trade
  • Larger sites > 15,000sqm of GFA are receiving the strongest level of enquiry due to established operators and new BTR entrants competing in this space.

Despite the challenges we’re still working with a large amount of active capital on a variety of development deals.

If you want to know more or are keen to unlock your site, please don’t hesitate to get in touch for a confidential discussion.