New apartment sales the shining beacon in Sydney's residential market: PRDnationwide's Oded Reuveni-Etzioni
New residential apartments are currently selling better than detached houses, according to most estimates. However, other than for a few of the off-the-plan developments, data is not readily available, imposing a reliance on people in the field to ascertain the true performance of the market.
Nonetheless PRDnationwide continues to witness the shift in demand from detached houses to units.
New South Wales already has the largest number of strata-titled properties in the country, with approximately one quarter of Sydney’s population living in strata titled homes, according to the University of New South Wales.
The following trends contribute to the demand for units:
- Gen Y’s preference for well-located property, close to amenities and if possible to city centres departs from their parents’ choice of detached homes in the suburbs.
- Local and overseas investors are trying to predict the demand from Gen Ys and look for modern apartments with close proximity to entertainment precincts. They draw confidence from the strong increases in Sydney’s rents over the past 12 months and the advantages in not tying large amounts of capital until the development is complete.
- Some owner-occupiers use the extended period until the settlement of their new apartments to prepare their current residence for sale, possibly receiving higher offers for their house or unit in a rising market over the next 12 to 24 months.
- From an investment point of view units show higher liquidity, with lower time on the market and lower discounting than houses.
Over the past three years we have seen a fall in first-home buyer activity as government incentives decline. First-home buyers’ activity was likely to drop again when the stamp duty exemption for purchases of apartments below $600,000 was withdrawn at the end of June, however the exemptions will now continue.
At the same time second-home buyers or upgraders are active in the market, as well as downsizers. It is interesting to note that some downsizers who live in apartments in three-storey walk-up buildings and are nearing their 50s and 60s find modern building that include an elevator and easy access attractive as they start to plan their retirement.
Further, some areas such as south Sydney are experiencing strong sales activity due to changes in zoning, as suburbs such as Botany and Mascot turn from industrial to residential hubs. This leads to an increase in the values of existing houses and apartments, allowing their owners to borrow against the rising levels of equity to purchase new properties in the same area.
The sale of new residential apartments is Sydney is buoyed by an extensive buyer base and an increasingly attractive product. However, in order to ensure the performance of the dwelling, it is vital for investors and owner-occupiers to look for well-located properties that will appeal to a wide range of buyers.
Oded Reuveni Etzioni is a research analyst at PRDnationwide.
Photograph of scaffolding by Victoria Pickering, courtesy of Flickr.
