Affordability is causing the housing market to stumble as high house prices begin to take a toll on Sydney’s performance
Despite the strong performance of the Sydney market, rising values are making it increasingly difficult for buyers to afford property. Thus, apartments are coming to the fore.
“For a lot of people, units have become the only option to enter into the market. They basically can’t afford a house,” says Cameron Kusher, research analyst at CoreLogic.
“Changing demographics and prevalence of single-person households are certainly a contributing factor, and that’s probably another reason why you’re seeing a stronger performance in the unit market. Also, Sydney’s been approving more units for construction than houses for the last two decades.”
Apartment stock is increasing, especially in the metro areas – the inner city, Parramatta and Sydney Olympic Park. Sydneysiders have become accustomed to unit living, which makes the unit market stronger here than in other capital cities.
Regional areas pick up speed
Another way in which buyers are handling the affordability issue in the metro is by looking beyond Sydney itself into other less expensive markets.
For instance, Parramatta, which is regarded as Sydney’s second CBD, is in line to receive a major urban overhaul in the next few years. The construction of Parramatta Square is expected to bring new life into the commercial area; as a result, a significant increase in population in the near future is anticipated.
“There will be a substantial increase in jobs in Parramatta, with approximately a 33% increase in office space between 2016 and 2021,” says Rich Harvey, CEO of Propertybuyer.
Ged Rockliff, head of residential at Savills Australia, adds that employment in Parramatta “is forecast to grow from around 157,000 to 186,000 [jobs] in the next four years”.
Demand may also be spilling over into the Central Coast, the midway point between Sydney and Newcastle. Given the distance from Sydney, Central Coast properties are more affordable, while offering convenience for workers in either the capital or Newcastle. This this region has therefore been performing admirably, according to Oliver Myers Real Estate, and experiencing much infrastructure growth, with improved accessibility and new amenities. Both the residential and commercial sectors are reporting development throughout the area, meaning investors have the opportunity to get into a market with high potential.
This situation is a step up from where Parramatta was last year, when demand seemed inadequate to meet supply, and prices were falling. This upswing appears to underscore how strong the effect of undersupply in Sydney is on the rest of the state.
SUBURB TO WATCH
CLOVELLY: Expensive suburb cultivates strong demand
Suburbs by the sea often have a good reputation among buyers, and Clovelly is no exception. This suburb has seen massive growth in the 12 months to April 2017, with price increases for units breaking through the 20% mark and for houses hitting 16%.
House prices are inching closer to the $3m mark, and the median unit price has shot past $1.2m, making Clovelly a rather expensive area. Its excellent location certainly justifies its high cost, though – aside from being near Clovelly Beach, Clovelly is just 8km from the Sydney CBD. The suburb has several shopping precincts, and the beach is very popular in the summer. Buses also run from Clovelly to the CBD.