Inner Sydney running out of space for off-the-plan developments

Given the drop in approvals in 2009-10 and a lack of available development space, investors looking to get their hands on an off-the-plan apartment close to the Sydney CBD will need to act fast.

According to research by Colliers, there are limited opportunities not only for developers but also for individuals seeking to purchase a new apartment off the plan.

There were only 568 inner-city Sydney apartments for sale and 1,440 off-the-plan units for sale in 10 projects in the first half of 2011, according to Colliers, with only 384 apartments approved for development and 655 at the application stage.

Once the Stamford Residences and the Reynell Terraces (both in The Rocks) are completed there will no new supply in the northern precinct (stretching south from the Harbour foreshore to Market Street and east to Macquarie Street) until 2015, says Colliers.

East Exchange in Darlinghurst, which is being developed by the Maygood Group, is anticipated to be the next development completed in the eastern precinct, the zone incorporating blocks east of College Street, to the north of Oxford Street to William Street, west of Darlinghurst Road to William Street and the entire suburb of Woolloomooloo.

Other projects due for completion in the short term in the east include the 87-apartment The Residences overlooking Hyde Park and being developed by Cbus Property and also Dominion, a 110-unit luxury apartment project being developed by Hilliers and Cbus Property

Within the southern precinct three projects are currently under construction including Parkview’s Inmark Tower, a 37-storey tower on George Street, which will have 217 apartments and is anticipated to be completed shortly.

This precinct is defined as south of Bathurst Street from Darling Harbour to Hyde Park, south of Liverpool Street (between Elizabeth and College streets), west of Wentworth Avenue, west of Elizabeth Street to Cleveland Street, north of Cleveland Street (between Elizabeth and Abercrombie streets), Broadway to the corner of Pitt and Hay Streets, north of Hay Street and west of Harbour Street.

The biggest CBD apartment project still selling off the plan is Fraser’s $2 billion Central Park project off Broadway. The first batch of 228 apartments, priced between $460,000 and $1 million, was sold off the plan within six weeks of being released in August 2010 followed by a second batch of 100 apartments released in October 2010 and a third batch of 150 apartments released in December 2010, with prices  between $610,000 and $1.25 million. Upon completion Central Park will comprise about 1,900 apartments, student housing, a hotel, a 16,000-square-metre multi-level retail centre and a 75,000-square-metre commercial office campus.

Colliers expects median apartment prices to continue to rise in the long term due to the scarcity of development sites.

As the new projects around Hyde Park and in Darlinghurst and Woolloomooloo settle in the coming years new price benchmarks are anticipated to be set.

Take-up rates from overseas-based buyers may decline in the short term while prospective purchasers wait to see if the strength in the Australian dollar is maintained.

However, the Sydney CBD’s demand drivers and limited development opportunities are likely to ensure this is a short-term trend.

“The potential level of future supply will continue to be impacted by the availability of funding and potentially some projects may not commence construction.  Future development prospects remain most prevalent in the southern precinct due to a number of brownfield sites,” Colliers says.