Sydney apartment market headwinds subside, but much still to be done: JLL
The headwinds facing the Sydney market are starting to ease, but further hurdles need to be overcome before the market stabilise, says a new report from JLL.
Its Australian Residential Research – April 2019 report says the market is still trying to absorb the tail end of a significant supply cycle.
The report says “the final recommendations of the Hayne Royal Commission have not tightened credit further and APRA have loosened its macro-prudential measures”.
But measures to boost demand will take time to take effect.
JLL says that the economic outlook for the state looks positive, with the state’s infrastructure pipeline to underpin economic growth in NSW.
“The coming Federal election is also likely to stifle demand in the short-term and the result could impact the longer-term outlook if Labor’s proposed property tax changes are passed,” it said.
“Meanwhile, the economic outlook for NSW remains positive.
“The re-elected State government is committed to infrastructure spending, which will support employment growth and underlying housing demand.”
On the demand side, both foreign and domestic investor demand continues to decline, but first home buyers remain active.
“Demand from foreign buyers is expected to continue to fall as the Federal and state governments are unlikely to remove foreign stamp duties or foreign investment application fees, which would offer some relief to foreign investors in the near future,” JLL said.
Meanwhile, apartment supply pipeline remains subdued, as fewer projects progress to construction.
Apartment values are falling, however there appears to be some easing in decline.
“Capital values will continue to face pressure in 2019 and experience further decline,” the report said.
Apartment rents declined across Sydney, while the vacancy rate showed signs of stabilising.
Gross apartment yields remain stable and the lowest of all capital cities.
“Teh vacany rate is expected to stabilise towards the backend of the year,” JLL said.
“Rents are expected to follow, with any further decline likely to be marginal.”
