Sydney apartment market expected to fall in 2018, but may bounce back

Meanwhile, apartment construction is certainly booming, with JLL’s data showing about 4,500 new apartments built throughout the year to date, with 7,800 in total expected by the year’s end. Last year, there are 5,000 completions in the inner Sydney area.

JLL’s head of residential research Leigh Warner said he expects the market will slow in the short term due to macro-prudential measures from APRA and Chinese capital restrictions, along with more supply expected to be completed.

“However, we do not expect widespread oversupply. Sydney’s recent construction boom has been making up for a decade of undersupply,” Mr Warner said.

“Market balance has certainly now moved back to around equilibrium with recent supply additions, but the continued low vacancy rate and rental growth is the strongest indication it has not tipped into oversupply.

“The supply pipeline is reaching a peak now and will fall in 2018. The combination of slower pre-sales demand and tighter development lending criteria by the major banks is acting to self-regulate supply levels. However, there is still considerable construction yet to complete that will further slow price growth and soften the rental market over the next few quarters, particularly in certain pockets of high supply concentration."

By 2022, the supply pipeline is predicted to consist of 40 per cent in Sydney’s inner south areas, and an additional 23 per cent in the inner west.