When buying a property, Sydneysiders choose apartments
Investors and buyers alike will want to keep an eye on the numbers coming out of Sydney's ...
Investors and buyers alike will want to keep an eye on the numbers coming out of Sydney's apartment market. Off-the-plan apartments are increasingly becoming the go-to type of residential real estate in the Harbour City.
Economic forecaster BIS Shrapnel has released its Apartments in Sydney Suburbs 2014 to 2019 report, which predicts that Sydney's high density apartment market will stay strong going into 2016.
During the year to March 2014, around $45 billion was borrowed to buy residential housing in the state of New South Wales, says the report. This was 76 per cent more than the amount borrowed during 2010 and 2011, a testament to the huge level of demand for housing at the moment.
High-density building approvals alone have more than doubled since 2010 and 2011, from 9,932 to 20,354 in the 12 months before March 2014, according to the report. BIS Shrapnel expects the level of high density apartment approvals to sit at above 20,000 dwellings a year going into 2016.
Low interest rates, vacancy rates feed demand
The city's booming apartment market is being driven by tight vacancy rates, as well record-low interest rates since the end of 2011, which has seen investors jumping at the chance to take advantage of these conditions. In recent years, the falling vacancy rate has seen those looking for a rental property paying higher prices for rent, while the property owners have lost less on their repayments.
"By the time interest rate policy was eased at the end of 2011, the Sydney market was coiled like a spring, and ready to take off," said Angie Zigomanis, BIS Shrapnel senior manager and author of the report, in a June 5 statement.
"Successive cuts to interest rates continued to reduce the gap between rental income and mortgage repayments, causing investor demand to surge and drive up prices."
Indeed, prices for Sydney units grew by 18 per cent across the last two years, and are expected to increase another 15 per cent over the next two, according to the report.
Owner-occupiers a significant force
While much of the talk around the Sydney property market is about investors - who do continue to dominate the apartment market - owner-occupiers are growing in numbers.
Between the 2006 and 2011 Census, owner-occupiers rose from 39 per cent of all occupied apartments to 42 per cent.
Even more surprising is that this is not the familiar narrative of empty nesters occupying cheaper properties. In fact, Generation X and Y are helping push the owner-occupier numbers up, turning to high-density, off-the-plan apartments as a choice for permanent residence.
Whatever demographic you fall into, you may want to chat to a real estate agent if you wish to enter Sydney's apartment market.