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Staff Reporter
Multi-unit developments continue to be the most popular new dwelling type in Sydney, new research has revealed.
BIS Shrapnel’s Medium and High Density Dwellings in Sydney Suburbs Report 2010 to 2015 shows the pickup in new dwelling commencements in the Sydney market during 2009/10 will maintain its momentum in the coming years, with all new dwelling types experiencing an upturn in construction.
However, according to the report, the composition of dwelling activity will not revert back to that seen in more buoyant times.
“After peaking in 2003/04, the downturn in the residential market in Sydney saw new dwelling approvals across the city steadily fall to 50 year lows by 2008/09,” BIS Shrapnel managing director Robert Mellor said.
“Affordability remained a constraint on owner occupier demand in this period, while the lack of price growth also deterred investors.
“More recently, the Global Financial Crisis also limited development finance, which had a significant impact on other dwelling approvals, particularly high-density apartments in larger projects. This has served to further constrain new supply, with vacancy rates continuing to remain tight and push through further rental growth, setting the scene for the current upturn in construction. The pent up demand from the deficiency of dwelling stock, and an environment where economic growth is picking up and interest rates are stable over the next six months, is expected to see the upturn continue, with prices rising and construction increasing significantly across all dwelling types from the near-record lows of recent years.”
BIS Shrapnel said compared to the other capital cities, detached house construction in Sydney will be less prevalent. After accounting for around 50 per cent of total dwelling activity in the 1990s, houses have comprised less than 40 per cent of total dwelling approvals in the last decade.
Conversely, the share of medium and high-density dwellings has increased from around half of new dwellings, to just over 60 per cent. High vacant land prices have tipped demand towards new multi-unit dwellings, with this balance expected to be maintained over the next five years.
“Activity in the Sydney residential market has largely been driven by the passage of the baby boomer generation through the age profile, firstly in the 1970s and early 1980s as first-home buyers, and then as second and subsequent home buyers (upgraders) from the mid-1980s to the present,” Mr Mellor said.
“Despite the 50 to 64 and 65-plus age brackets having the fastest rate of population growth, they still have a high propensity to be living in detached houses. Nevertheless, their rate of occupancy of medium-density and high-density dwellings is rising, and we expect this group will become an increasingly important source of occupier demand for higher-density dwellings between 2011 and 2015, based purely on population growth.”
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