Sydney’s high-density apartment market will remain strong for two more years before prices ease, according to BIS Shrapnel.
A new report from the market research firm has found that low interest rates and expectations of price growth will continue to make it a seller’s market in 2014/2015 and 2015/2016.
“Off-the-plan sales will continue to remain strong over the next couple of years, underpinning further rises in new high-density apartment construction,” according to the Apartments in Sydney Suburbs 2014-2019 report.
“Although the market is not anticipated to end in an oversupply, vacancy rates are forecast to begin to ease and reduce pressure on prices by the time the Reserve Bank starts looking at tightening interest rate policy, with off-the-plan sales also expected to begin to slow over 2016.”
Approvals for high-density apartments have increased from 9,932 in 2010/2011 to 20,354 in the 12 months to 31 March 2014.
They are expected to remain at just above 20,000 in 2014/2015 and 2015/2016, with prices forecast to increase by 15 per cent during that time.
BIS Shrapnel said increased interest rates would eventually lead to a cooling of the market.
The cash rate is likely to rise in mid-2015 and then peak in late 2016, “thereby dampening demand over the subsequent years, and causing both new apartment approvals to decline and prices to weaken”, according to BIS Shrapnel.