Apartments have been a part of Sydney’s housing fabric for at least 120 years and as might be expected architectural styles, locations and values have been constantly changing and evolving.
Recently while walking through Elizabeth Bay I came across a building where the art-deco foyer contained a set of door-bell buzzers and each neatly displayed the owners name in gold-leaf lettering.
While in the far distance I could soon see a new major apartment project that when complete, would be 50-plus storeys high. I found myself thinking that the contrast between these two buildings was the perfect way to lead into this content taking a birds-eye perspective of the current Sydney apartment market.
The Sydney apartment market is at the very least is incredibly diverse with lots of exciting and different suburbs, neighbourhoods and individual buildings.
Grasping these few thoughts, I’ll start by suggesting some of the most exciting areas among which, in no particular order, that I would nominate; the Sydney CBD, Lower North Shore, Northern Beaches, Eastern Suburbs, Inner West, Parramatta and Penrith.
Each of these markets are clearly very different and they offer varied opportunities and I’ll explore this topic in two parts, starting with the CBD, the Northern Beaches and the Eastern Suburbs.
Sydney CBD Renaissance
Perhaps going out on a limb, I’d suggest that the Sydney CBD apartment market is fast becoming one of the most fascinating and remarkable apartment markets, not only for Australia but also pretty-much on an international level. Here’s some of the factors that inform my view.
The first and very obvious reason is that Sydney CBD is in the midst of a multi-billion dollar renaissance. There’s a construction and infrastructure boom underway. Leave Sydney today and come back in say 5-years’ time and there’s a reasonable chance you will not recognise the place, and new apartment projects are very much part of this amazing transformation.
In part what this means is that the residential market in the city is becoming ever more attractive and popular. More density and activity that in-turn helps create a true 24-hour city and that attracts buyers which is driving demand, which is mainly being driven by local buyers.
For potential residents the CBD is now forming several distinctive neighbourhoods including Circular Quay/The Rocks, Darling Harbour, Chinatown, Hyde Park and Barangaroo.
The city is also becoming much more easily accessible and the Metro will create several new gateways adding to the appeal of the CBD for residents, visitors and those working in the city.
However, as these varied neighbourhoods mature building amenity and quality is driving demand and creating potential for record prices. In October a reported apartment sale in Barangaroo South of over $140 million became Australia’s most expensive residence. Prices like this (although perhaps not as high) are also set to become more common, as the movement for ‘hotel-style’ amenity and services, while not for everyone, is set to take hold over the next few years.
All of these factors are combining to create an apartment market with more depth and wide appeal, and I’d expect future supply to respond to this demand, as the CBD market has a bright and strong future ahead.
The Northern Beaches
Sydney’s Northern Beaches remain constantly popular, the area’s character and appeal is highlighted by its natural beauty and golden sandy beaches. However, this is a market where supply is limited now and there are major constraints on future supply.
While there are a number of growth regions across the Northern Beaches where the last 5-years has seen a big jump in supply, these areas are limited, and a great deal of the potential growth has already been taken up. Further expansion will not be easy.
This is a particular factor in premium demand areas like Manly and Freshwater, these are locations that get a big tick from potential buyers and this one factor alone will drive prices in coming years.
Despite demand being strong there are many factors that result in sites for new projects being hard to achieve, the area’s popularity for single homes and its geographic limitations makes site amalgamations very hard and there are varied and many planning limitations.
Equally hard is the re-development of existing strata-buildings and that’s despite the fact that many older buildings including ‘walk-ups’ are now seen as secondary buildings by comparison to modern new projects. However, unlike some parts of the lower north shore re-development of these buildings is generally not yet economically viable.
For the Northern Beaches market, the immediate future is one of strong demand constrained by limited supply and limited re-development potential. Prices will remain firm, however despite this, stronger gains will in the immediate future be limited to prime locations and areas like Manly and Freshwater.
This may, however, change when a number of major transport infrastructure projects, including the seven-kilometre Beaches Link tunnels from Balgowlah and Seaforth to the Warringah Freeway at North Sydney, then connecting with another proposed tunnel under Sydney Harbour is completed.
The Eastern Suburbs
The Eastern Suburbs offer a larger and very diverse, always popular and forever changing market. It’s home to many iconic suburbs and facilities and has a strong multi-cultural appeal on top of it’s easy access to the CBD.
The area is always seen as desirable for both eager owner-occupiers and it is Sydney’s largest rental market. This factor helps to create an interesting demographic that drives demand for apartments in several different ways.
Famously in the past these demographics have helped create some very popular areas like Potts Point and Kings Cross, areas which have moved from bohemia, to centres of R&R during war-times, to pockets that are today regarded as ultra-cool.
The impact of this diversity and shifting demand can still be seen in today’s housing market and that includes for the unique features of for example three varied suburbs; Randwick, Double Bay and Bondi Junction.
Each of these locations is currently being driven by a handful of powerful market conditions that are fuelling demand and pushing up values.
Randwick for example is being driven by many positive factors, including the new light-rail link, strong established services, and a big employment base centred around medical and education. All of these factors have always driven demand for apartments, but in combination there was pent-up and growing demand for new quality product such as Newmarket.
Double Bay by contrast is being driven by a completely different set of market imperatives, and after suffering an almost decade-long hangover following the opening of Westfield Bondi Junction, is now back in demand as new developments combine to boost the areas lifestyle appeal.
Double Bay is seeing benefits flowing from high-quality low-rise projects being built around the areas core retail area and this is leading to a revival of the areas retail fortunes.
There’s a direct relationship also with the area’s appeal to local often wealthy, downsize buyers looking to experience the areas cosmopolitan appeal however, these buyers are very demanding in terms of quality, and are not easily compromised and developers have responded accordingly.
Bondi Junction is yet another completely different eastern suburbs market that is sometimes loosely tied to the appeal and recent runaway success of Bondi Beach. The suburb is a great favourite with investors because of its well established transport, retail and recreational facilities.
The suburb currently presents as two markets, if you like a double market, with both popular among investors and owner-occupiers.
To the north-east there’s been very positive demand over the past 3-4 years with strong prices for new developments. To the south-west there’s been a big increase in supply however, sales have remained steady if not robust, the area appears to be shifting from an investor focused market to one with greater popularity among owner-occupiers, and again quality is important.
Across the eastern suburbs location and quality remain important and even small variations can have a big impact on demand and values; however, the areas’ diversity remains popular with residents.
Next week Part Two and Conclusion
It’s easy to appreciate the many layers of Sydney’s apartment markets, and next week I’ll look at the Lower North Shore, the Inner West, Parramatta and Penrith and try to answer the question where to now?