All you need to know: Property Developers, Investments & Market Insights in Sydney

Over the last two years, Sydney has become one of Australia’s largest property markets in the world.

There is no wonder why the Real Estate industry has placed a huge emphasis on Sydney’s property market.

If you haven’t already noticed, there has been a clear change in the market as of mid-2017 with a detrimental drop in property value.

Sydney property market prices:

In regards to the property market prices in Sydney, here is a quick rundown on how it is looking:

• Sydney has reached a record-breaking median house price of $1 million
• Sydney is now one of the most expensive locations in the world to buy
• Approximately 78 suburbs in Sydney have a median house price of $2 million (compared to a mere 6 suburbs, only 5 years ago)

There are three things that critically influence property prices in Sydney:

1. Population
2. Employment
3. Infrastructure

Combine all three and the city has the perfect recipe for long-term investment.

1 – Population: Why the people of Sydney are so unique

‘Sydney’s population grew by 1.7 percent last financial year (2017-18) while the rest of NSW grew by 0.8 percent giving the State an overall annual population growth of 1.6 percent’

– Property Update  

Sydney has a very diverse populace with more than half its population born overseas. This results in a very multicultural and ethnically diverse city.

The layout of Sydney makes it unique, as it ranges from beautiful coastal regions to mountains, and an amazing compact CBD, which is located around the famous harbour.

In 2014, suburbs including Bellevue Hill, Vaucluse, Palm Beach, Dover Heights and Mosman were seen to be the best selling, quickly followed by much of the waterfront suburbs. Surprise, surprise – all of them have waterfront views.

The go-to strategy for property purchases is no longer buying a large home on a large block.

For Sydneysiders, the increase in population is not because of larger families, it is mostly due to the higher holding of singles and ‘households without children’ rate.

The larger families are moving to locations such as Parramatta, which are usually associated with apartment/dense living.  This can be attributed to the various convenient transport options and the recent upgrades to rail links and highways, which are closing the divide between the top tier and low tier suburbs.

Residencies are becoming smaller and denser, meaning apartment/dense living is becoming increasingly popular.

2 – Employment: Sydney as a hub for economic power

The strongest effect of this population growth is the epidemic of career driven individuals who now flood the sea of Sydney’s employment market.

According to the Australian Bureau of Statistics, NSW, namely Sydney, has the highest amount of jobs compared to every other region in Australia. In addition to this, it is the second highest region with the greatest job to population ratio, after ACT.

This means that the availability of jobs only attracts more interstate and intrastate migrants. This creates a ripple effect; more jobs means more demand for housing.

3 – Infrastructure: Sydney is catering to is population property ratio

As a result of the population to property ratio, the availability of various infrastructure, including educational facilities are sprawling, as Sydneysiders are becoming increasingly attracted to such in the last 2 years.

The increase in facilities means an increase in property market fever; both commercial and residential. Jobs are now linked quite easily to economic regions through public transportation, paving the way for service routes, making commute time as short as possible for Sydney workers.

The City of Sydney also has plans to connect the eastern suburbs and western district, creating open access between them. This is, in turn, creating a trend where buyers are shifting to more suburban/urban locations, such as Parramatta.

The increasing popularity of purchasing off-the-plan apartments in Sydney has been considered a means of ‘saving’ when it comes to purchasing as the NSW Office of State Revenue provides certain concessions.

This has led to Sydney holding the highest rate of capital growth over any capital city (in the world) in the last decade.  

This increase sees no stalling. There is an expected $87.2 billion being invested towards NSW infrastructure over the next 5 years.

As Sydney is known as being a powerhouse for luxury lifestyles, everything is based on convenience. The Department of Infrastructure in NSW has taken this on board and has planned to increase building educational facilities, health precincts and public transport.

Why the decline in property prices for Sydney developments?  

This rapid growth in capital has been largely due to the growing rate of investors, making up almost half of the purchases being made in the Sydney property market.

Parramatta has no doubt placed itself on the map of NSW and has become a stronghold of business, leisure and residential facilities. Shaping the city of Parramatta, Sydney developers have contributed much to the construction of apartment buildings, in an attempt to appeal to potential buyers and create an increase in the investment market.

However, as of late, investors of all sorts have slowed down, meaning so too has the market. Buyers are feeling the pinch of lending policies, giving equity holders the upper hand on Sydney properties, and Sydney properties dropping in price.

Apart from the property price decline, the rental yields in Sydney have also weakened, further reflecting the lack of strength for property gains.

Sydney has experienced its sharpest downturn in over two decades, declining 10% in the last year, as outlined in the latest report from the Domain Group.

However, we have a spotlight shining on off-the-plan apartment buying; brand new, options of amenities, no worrying about full purchase price until it is complete, and the list goes on.

Off-the-plan buying is increasing as it is an attractive alternative to property purchasing. But what if the drop in market prices continues to demise? Is it a waste to have invested in an unpromising plan?

Risky business for property developers in Sydney

The apprehensive nature of buying readily built properties of Sydney siders means that there is a risk for developers.

In addition to this, obtaining finance has never been more difficult. Lenders are going insofar as asking for Uber account details to monitor spending habits, influencing lending capacities for potential buyers, especially first-timers.

Combine this with the market risk, Sydney developers are seemingly cornered into taking the risk of building, namely high-density building, with the potential issue of losing the return on investments and no promise of investors/purchasers.

Despite this, Sydney developers have remained very eager, consequently building major residential high-rise developments.

It is crucial that people understand, through tedious research, the oversupply of properties in certain locations within Sydney and purchase where best analysed as promising in return.

Overall, it is important to understand the property market in Sydney before making a purchase as an investor or a first-time homeowner. Analysing the market and researching current trends and insights helps you in making the right choice. In addition to this, it is important to look out for quality finishes, the location of the property and the quality of the build which can ultimately affect its lifespan.

At Cite Group, we aim to develop quality properties within Sydney in leading locations. Whether you are looking for an property development investment or a dwelling for your family, we have a variety of options that can cater to your specific needs; without the risk of compromising quality.

To read more about us, visit us at citegroup.com.au