APPD Market Report Article


December 1, 2021


AUD 600


Owner-occupier demand remains strong

  • General housing market sentiment has remained strong through NSW’s COVID-19 lockdown. Housing sales activity, including apartments, should be boosted significantly now restrictions have eased and international borders are reopening.
  • Off-the-plan apartment sales remained robust for quality owner-occupier stock, particularly from downsizers. Investor demand has also been improving, but sales rates remained moderate and there is still some competition from residual unsold stock from the last supply cycle in some areas.

Smaller projects in premium locations to dominate new supply

  • Just over 2,000 apartments have been completed across inner Sydney over the first half of the year, with slightly more currently scheduled to complete over the remainder of the year. This would take 2021 completions to slightly above 2020 levels, but still around 60% lower than the 2018 peak. However, recent lockdowns could feasibly push some completions into 2022.
  • Vacancy across Greater Sydney is below that of a year ago. Similarly, while CBD vacancy remains elevated, it too is below the same time last year. Nevertheless, vacancy is much lower (and rental growth higher) for detached stock and the apartment rental market is still softer in some areas of recent strong supply.

Dwelling prices (including apartments) continue to surge

  • The rebound in detached housing prices has been extremely strong. Existing apartment prices have also grown significantly over the past year, but by nowhere near the same level. This has seen the pricing differential between the two grow substantially, which will support apartment demand moving forward as more people are priced out of the detached house market.
  • Strong capital growth in existing prices and pressure on rents over the past year has seen rental yields fall over the past year. At 2Q21, average gross apartment yields across Greater Sydney was just 3.4%.

Outlook: Open borders should boost apartment demand

  • Sentiment and price growth help up strongly through Sydney’s recent lockdowns and the apartment demand recovery should gain considerable momentum now investor demand builds and as borders reopen and student and migrant demand rebounds.
  • Increased demand is also likely to be met with moderate levels of new supply over the next few years, which will help support market balance over the medium term. This is likely to be particularly felt in the rental market – the fall in vacancy and rise in rental growth should accelerate as borders open.

Note: Sydney Residential refers to Inner Sydney apartments. Price and yield data sourced from CoreLogic. Rental and vacancy data sourced from the Real Estate Institute of New South Wales.

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