Downsizers with full equity snapping up Sydney three bedder apartments: BIS Shrapnel

Two bedroom apartments account for the majority of the Sydney apartment stock, at 56% of occupied apartments., according to a report by Angie Zigomanis, senior manager of residential property at BIS Shrapnel in a report on the deterioration of affordability in Sydney.

Studios and one bedroom apartments account for another 28% of Sydney’s occupied apartment stock, with the remaining 16% containing three or more bedrooms.

The majority of movers into three bedroom apartments are owner occupiers (58%), with the higher percentage (31%) being fully owned.

"This suggests the majority of owner occupiers coming into three bedroom apartments are downsizers and are buying with full equity," Angie Zigomanis noted.

His study of Australian Bureau of Statistics, shows tenure differs across apartments in Sydney.

Studio and one bedroom apartments are dominated by rental tenants, who account for 70% of households moving into these apartments over the prior five years.

"In contrast, only 9% were fully owned suggesting that studio and one bedroom apartments are not attracting downsizers.

"Around 57% of movers into two bedroom apartments were tenants."

The report noted the deterioration of affordability in Sydney had encouraged a shift towards both apartments over houses, and also into middle suburbs compared to inner ring suburbs.

BIS Shrapnel’s Sydney apartments report found 55 per cent of apartment building approvals in 2014/2015 were located in middle-ring suburbs, compared with the 37 per cent in 2010/2011.

Overall commencements of apartments in buildings four storeys and above have increased from 8,300 dwellings in 2010/11 to the record 19,450 dwellings in 2014/15.

He noted dwelling completions exceeded underlying demand for the first time in 2014/15, with the deficiency falling slightly.

"However, given the 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."

Median unit price growth remained high at 14.9% in 2014/15 compared to rental growth of just 1%.

"The result has been that indicative unit yields in Sydney are now around their previous lows of 2003 to 2005, at 3.7% in June 2015," the report noted.

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