North West and South West Sydney lead pick up in residential land demand
Demand for residential land around Sydney has soared over the last six months, according to independent valuer and advisor m3property.
They say the reduced cost of debt, easier access to finance, smaller lots, and apartment market woes have been behind a noticeable pick up in demand for Sydney residential land in the last six months.
There was also a marginal price increase in the six months to June.
M3property's latest market report, Sydney Land Market Recovery, found land take-up had increased dramatically since the Federal election.
Jennifer Williams, national director of research, at m3property, said while take-up rates for land had averaged zero to two lot sales per month over the period September 2018 to May 2019, post-election take-up had accelerated to three to four lots per month and, in Sydney’s growth regions, six to eight lots per month according to proximity to railway stations.
"The take-up rate has accelerated markedly since May and there are a number of factors at play, not the least being the typical pre-election market paralysis and an election campaign characterised by much debate about housing issues including negative gearing and affordability," Williams said.
"Since the election APRA’s removal of the 7 per cent serviceability cap on residential home loans and the fall in the official cash rate from 1.5 per cent to 0.75 per cent have aided the borrowing power of most applicants.
Williams suggested smaller, and more affordable, lot sizes of 250 to 300 sqqm – lot sizes averaged 454 sqm at June 2019 - pent up demand, and an increase in the median Sydney house price, had also been drivers of a general market uptick, which had seen a modest land price rise over the first half of 2019 of 0.94 per cent.
Associate director residential development at m3property Ben Toole said negative apartment market publicity had also been behind some owner-occupiers’ decisions around a new preference for houses as a safer alternative.
"The cladding and construction flaws issues have been major negatives for the apartment market and not surprisingly those issues have affected consumer sentiment around what is, for most people, the biggest investment they will ever make.
"I have no doubt the apartment market will recover but for now it is one of a number of factors behind a significant resurgence in the take-up of land in Sydney,’’ Toole added.
He said while the rate of take-up had been highest for land in close proximity (two kms) of existing railway stations, the rate of sales was also dependent on developer reputation, the size of the subdivision, choice of lots and the stage of subdivision development.
Toole said there was still room for growth – take-up rates remain below levels reached in 2016 and 2017 – and particularly in areas where infrastructure was at the most advanced levels.
"The North West Growth Region has seen greater demand than the South West due to established transport services, including the introduction of the new Northwest Sydney Metro, while areas such as Box Hill, Schofields (Pictured top, the Akuna Vista development) and Marsden Park have seen higher sales rates and higher prices due to both a greater number of estates and more completed estates.
"While overall price points in the South West are slightly lower than the North West, areas such as Leppington and Austral are achieving higher price points due to the Leppington railway line,’’ Toole said.
The report found Greater Sydney was likely to see an undersupply of dwellings over the next five years based on the Department of Planning, Industry and Environment’s forecast of the completion of 191,550 dwellings over the five years from 2018/19 to 2022/23.
The numbers equate to 38,300 homes per year, a significant 22 per cent rise on the previous five years when 157,250 new homes were completed, but less than the required 39,600 houses per year should the average household size in greater Sydney remain at the same level as the last Census, Jennifer Williams said.
"If the 198,030 additional houses are required, as an extrapolation of the Census data suggests, then Greater Sydney is likely to see an undersupply of dwellings over the next five years.
"This is likely to result in a continued reduction of lot sizes in the Sydney region and increased lot prices over the five-year outlook,’’ Williams said.
