Upcoming three-year pipeline of new Sydney apartments sees a significant drop: Knight Frank
The Greater Sydney apartment pipeline is tipped to plunge by 2024, with the 36,275 new apartment developments to be completed over the next three years, well below the 67,925 recorded in the prior 2018-20 period.
The major decline has been revealed in Knight Frank Research’s Australian residential development review 2021, which tips a 47 percent decline.
“Limited new apartment project launches in recent years have highlighted the supply issues ahead for Sydney with decade low levels of new supply in the pipeline," said Knight Frank’s head of residential research, Michelle Ciesielski.
She also noted as developers commence construction, "they’re likely to feel the pinch from rising building costs and sourcing labour with limited migration and competition from a mammoth pipeline of state and federal government infrastructure projects being fast-tracked."
“With an increased reliance on sub-contractors, there is also competition coming from those dabbling in home renovation post lockdown.”
Despite a weakening apartment market, NSW has for the 9th straight year maintained its position as the nation’s leader for developer’s expanding their sites portfolio, accounting for almost half of all sales in Australia last year.
Of the $4.1bn of total residential development site sales recorded nationwide in 2020, Sydney accounted for $1.97bn which was above Victoria ($1.29bn), Queensland ($642m) and Western Australia ($84.8m).
While high-density apartments made up the majority of total Sydney residential development sales ($1.3bn in 2020), Sydney also experienced a significant increase in low-density developments.
Last year, 27.6% of development sites purchased across Greater Sydney were suitable for low density development,which was almost double the 14.2% share of low-density developments recorded in 2019.
Overall, a total of 8,280 new single allotments were released across Greater Sydney in 2020, up 70.4% on 2019, while low-density building approvals grew by 7.5%, with 26,483 single dwellings.
Despite the trend away from high-density projects in Greater Sydney, Knight Frank noted there were developers making longer term plans for this product with a rapid rise in collective site developments – considered those with the potential for residential development and including more than one vendor–with GreaterSydney recording $474.7m of sales in 2020.
The investment being made in collective site developments in Sydney is the highest among all capital cities.
Knight Frank's Head of Investment Sales in NSW, Grant Bulpett said: while HomeBuilder has lured first home buyers to the low-density market, many developers were already seeking longer term plays with significant englobo parcels being purchased in recent years.
“This gives these developers options to subdivide, then turn the tap on and off to meet market demand.
“With strong off the plan sales, low-density developers in Sydney are certainty operating in a low risk environment, however the increases in contributions and delay in service delivery in emerging markets is proving difficult to navigate.”
“With the residential market heating up, many developers are favouring development approved sites to get their project sales moving and capitalise on the current demand.”