Increasing affordability pressures are continuing to drive the off-the-plan apartment boom in Sydney, with a rising number of new approvals located outside of the inner city.
New apartment commencements reached 19,450 during 2014-15, according to BIS Shrapnel’s latest Apartments in Sydney Suburbs Market Brief – an increase of more than 10,000 from the figure recorded just a few years ago.
There were 8,300 commencements for apartments four storeys or more in 2010-11, when 37 per cent of total apartment building approvals were in middle-ring Sydney suburbs.
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BIS Shrapnel noted that middle-ring suburbs now accounted for 55 per cent of approvals, a sign that Sydney’s price growth was driving owner occupiers and investors towards apartments and the outer suburbs.
The brief also found the market came close to approaching oversupply levels in 2014-15, with dwelling completions exceeding immediate buyer demand for the first time.
However, years of insufficient construction levels between 2006-07 and 2011-12 resulted in an “estimated deficiency of 42,300 dwellings at June 2015”.
“It will take some time for the market to return to balance and this should still support an elevated level of new dwelling activity” based on future demand modelling, BIS Shrapnel said.
The latest market brief also provides an insight into the types of apartments investors and owner occupiers want.
Studio and one-bedroom apartments were dominated by rental tenants, who accounted for 70 per cent of households moving in over the five-year period to 2016.
Fifty-seven per cent of two-bedroom apartments were occupied by tenants, and households with a mortgage accounted for the larger share of owner occupiers – 27 per cent compared to 16 per cent of fully-owned apartments.
Fifty-eight per cent of those moving into three-bedroom apartments were owner occupiers, and 31 per cent of these owner occupiers did not have a mortgage.
Median unit price growth reached 14.9 per cent in 2014/15, compared to rental growth of just 1 per cent.
Unit yields recorded at lows similar to 2003/2005 — 3.7 per cent in June 2015.