There are no signs of new home construction slowing in Sydney, with the latest figures from the NSW Department of Planning & Environment reporting a 16-year high.
Over the 2015/16 period more than 30,000 new homes were completed in Sydney – that’s 10.4% up on the previous year. And two out of three new homes being built within the Sydney area are now multi-units.
But what does this really mean?
It’s good news for brokers, according to Shane Garrett, senior economist for the Housing Industry Association (HIA). More homes to sell, means more money for them, right?
But this boost in housing supply is only just starting to make up for a decade’s worth of under-building in Sydney.
“Sydney has chronically suffered from an undersupply of property over recent years. From 2002/3 over the following ten years, building in the Sydney market was pretty depressed,” said Garrett, noting that Sydney needs to keep building as the market is showing signs of pressure from under-supply in areas such as dwelling price growth and rental vacancy rates.
“Supply still has much to do to make up for the years of under-building that we had,” he said.
He also noted that demand had remained pretty strong thanks to population growth and plenty of employment opportunities.
“It is important that Sydney’s dwelling stock expands in order to accommodate the strong, migration-driven growth in the local labour market.
“The low interest rate environment is guiding people into purchasing their very first home or for those who have already bought, guiding those people into maybe upgrading and upsizing. That’s creating huge demand pressures on Sydney dwelling stock as well,” he added.
But the rise in new homes is only one part of the picture. When it comes to sales of existing homes, things aren’t looking so rosy, as Garrett points out.
“The amount of actual transactions of established homes has fallen off quite a bit over the past year. While we’ve been seeing very good figures for new home building in Sydney, this has been counterbalanced by a significant reduction in the number of established homes that are being sold in the city.”