With Sydney's population forecast to grow at 80,000 people per annum, around 33,000 additional dwellings are required to meet the forecast demand. While there is much talk of low interest rates overstimulating the property market, it is this population growth and subsequent increasing demand that is driving confidence within developers.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
This confidence is also the result of the broader picture for Sydney's long term growth. People want to be back in Sydney, both State and Federal Governments are investing in massive infrastructure projects that are creating jobs, and housing is now being provided via rezoning to meet the growing demand.
Demand for residential property is driving developers' appetites for "mega sites". Traditionally sites that would yield up to 500 apartments would have been considered "mega", but now developers are seeking sites that yield twice that amount. Sites are being sold raw without approvals, which indicates long term confidence.
This activity by developers is underpinned by the steady demand for good quality new homes in well-designed and connected developments. Hot spots for new sites include The Hills – Castle Hill; the Show Grounds & Norwest areas, which are undergoing a massive amount of rezoning to support the rail corridor; and St Leonards, which will supply the North Shore with the development opportunities which previously were only available in North Sydney and Chatswood.
In 2014 Colliers International sold 2600 apartments off the plan in Sydney, echoing the same market confidence at a mum and dad investor level. More than half these buyers were investors, but first home buyers and downsizers are also still active in the market. The demand for well-designed developments and master planned communities, which provide a range of living options, open spaces, amenities and connectivity continues to be strong, from both investors and own-occupiers.
Unlike the Melbourne market, which tends to have a dominance of activity within the CBD, demand for sites in Sydney have a wide geographical spread. About 55 per cent of pipeline stock in Sydney is located in the middle ring suburbs that arefive to 15 kilometres from the CBD. By contrast Melbourne's largest supply catch is the central city with 38 per cent of activity focused in that area.
There have been 19 mega sites sold in recent times, amid strong demand from developers.
Several more of these large sites are about to come to market, and early interest indicates a continuing appetite for these sites. The market fundamentals are pointing to long-term confidence from property developers.
Guillaume Volz is national director of residential site sales at Colliers International.
