APPD Market Report Article
SydneyFebruary 28, 2022
New apartment demand continues to improve steadily
- Low stock levels and high demand in the existing market have undoubtedly boosted off-the-plan demand, albeit individual project performance has varied across product types. Investor driven product remains challenging and demand remains shallow. Comparatively, the owner-occupier market remains strong, particularly for ‘downsizers’ and ‘right-sizers’ seeking a more boutique product offering.
- Quarterly sales volumes were up 14% in 3Q21 relative to 3Q20 (CoreLogic). Around 10,900 units transacted in 3Q21, compared to less than 9,500 in 3Q20.
Development conditions skewed in favour of superior projects
- Just over 3,800 new apartments completed across Inner Sydney over 2021, which is well down on the 2018 peak of 10,490 apartments. Development conditions remain challenging and supply is likely to remain moderate for at least several more years.
- Rental vacancy across Greater Sydney is below that of a year ago, but still slightly above its long-term average. While lockdowns in 2021 disrupted the recovery of the rental market, rents in some areas have started to rise and the worst has passed.
Price growth begins to temper
- Strong growth in apartment values over 2021 saw the market rise by 15.4% (CoreLogic, January 2022). Albeit prices have tempered recently, with quarterly growth slowing to 0.7% over the three months to January 2022.
- Strong growth in capital values, paired with a challenging rental market has seen gross yields decline over 2021 to around 3.3%. However, with price growth slowing and rental growth returning, yields are beginning to stabilise and may soon start to rise.
Outlook: Recovery to gain momentum
- The opening of international borders will be a boost to Sydney’s apartment demand as migrants, students and potentially foreign investors begin to return. At the same time, new supply levels will remain moderate for some time.
- An improved supply/demand balance is likely to be felt in the rental market, with the decline in vacancy likely to accelerate and rental growth build in 2022. While broader dwelling price growth is likely to continue to slow, a lower price point is likely to support demand and prices of apartments over the medium term.