NSW’s construction boom is beginning to wane as developers hold off new apartment projects over concerns falling investor demand will make units harder to sell.
Australian Bureau of Statistics figures released Wednesday showed approvals for multi-unit building projects fell 25.8 per cent over the year to July.
The fall followed a record surge in apartment building over 2016, particularly in suburbs near the Sydney CBD, Parramatta and in southern suburbs such as Mascot, Zetland and Wolli Creek.
Economists predicted the decline would continue for the rest of the year as tighter lending conditions and regulations push more local and foreign investors out of the market.
Limits on capital outflows from China have also made it more difficult for Chinese investors to purchase homes in Australia.
Investors accounted for close to 60 per cent of new apartment buyers last year, CoreLogic figures showed.
Housing Industry Association principal economist Tim Reardon said approvals were falling because developers were waiting for the current pipeline of new units to sell before building more.
“Lots of units are still getting built and developers are waiting for them to clear,” he said. “The amount of time it takes for current projects to sell will determine how soon they start building again.”
Developers were not holding back on building more detached houses, Mr Reordon added — approvals for new houses were up 5.7 per cent for the year.
This was largely because of the lower supply of new houses and their greater appeal to the owner occupier market, which was still strong.
“The number of detached houses getting built has been very consistent while unit projects hit a peak,” Mr Reordon said.
“Sydney isn’t oversupplied with units yet and won’t be for quite some time but it’s something investors and builders would be conscious of.”
A report released Tuesday by the Committee for Economic Development of Australia showed more homes would need to be built to stop property prices from ballooning further out of control.
Continued high density development would be vital for improving housing affordability, the report added.
The Property Council of Australia’s NSW director Jane Fitzgerald said a sustained decline in multi-unit approvals would be catastrophic for the market, considering many parts of the city remained undersupplied with housing.
“A massive decrease in supply would be a real concern for housing affordability because prices are ultimately linked to supply,” she said, adding that chronic housing shortages were behind Sydney’s recent price boom.
The city’s median dwelling price is currently $856,000, double what it was in 2009.
By AIDAN DEVINE
The Daily Telegraph