Supply ramps up…
One of the questions I get asked more than any other relates to Sydney’s property market and the looming supply of new apartments.
I recently looked at which LGAs are set to become flooded with apartments and which aren’t in a bit more detail here.
It’s certainly been an interesting construction cycle in Sydney.
In 2009 annual dwelling completions had fallen as low as 13,041, which incredibly was the lowest level of completions since 1953.
Lately there has been a mighty surge in Sydney dwelling approvals which peaked at 56,415 in October 2016, driven by record high rise apartment approvals, while completions are now hitting their straps too, rising to 33,310 over the year to November 2016.
The Sydney region here includes the Central Coast and the Illawarra.
Source: NSW Government
In Melbourne developers have reportedly slowed the rate of completions due to fears of oversupply, but to date there is little sign of developers in Sydney playing a similar hand.
…& so does population growth
It doesn’t always make me popular, but I generally don’t do those binary blog posts that tend to pepper the internet – not least in the real estate space – but in the real world nothing is all good, just as nothing is all bad.
While the ramp up in dwelling completions has been a worthy supply response, it’s only when you map the results against population growth that you begin to see why to date the impact on the market has been muted.
The interim 2016 figures for population change in the Sydney region have surged as high as 94,099 according to the NSW Government (the interim figures are sourced from the Australian Bureau of Statistics, Sydney Water Connections, and research by the Department of Planning & Environment).
The population of the Sydney region also increased by about 80,000 persons in financial years 2014 and 2015 respectively, thereby increasing by more than 322,000 in only four years, comfortably outpacing demand from the 100,328 dwelling completions over the corresponding four-year period.
Source: NSW Government
Note that these 2016 population projections are interim figures and may be revised.
But if they are close to being accurate they suggest that the ratio of Sydney population growth to completions in Sydney is still quite high at around 2.8.
Given that most completions these days are for smaller dwelling types – and that many are seemingly kept empty anyway – perhaps the supply response to date has yet to bridge much of the inherent shortfall from the nadir of the cycle, which lasted broadly from 2007 to 2012.
I took a look at approvals and net completions by dwelling type at the LGA level in a little more detail here.
Remember that there during 2016 there was a record number of apartments under construction, so those completions figures are going to run some way higher yet.