It is common knowledge that the Australian residential property market has seen a significant shift in the past 12 months, as the number of apartments being marketed has halved.
Australia’s new housing pipeline has reduced more than expected in March 2019 with a sharp decline in high rise approvals approaching a near 5 year low.
According to market research, we have seen a severe drop in new supply, with only 66,849 new apartments over the last 4 quarters being marketed nationally. This is down from 127,119 in March 2018.
The decline in approvals for high rise apartments slumped almost 40% to 2,858 from 4,736 in February 2018 and there is more than a 12% decline expected by economists for the first time since 2014.
Outlined below is the change in Net Face Rents and Vacancy Levels in the Sydney CBD, Parramatta and North Sydney:
We will however continue to see commercial property prices and rents increase, while office vacancy levels decrease alongside residential values.
Industry examples include:
- 85 Spring Street, Melbourne - Golden Age Group no longer proceeding with the $600m residential development choosing to sell the site. They will reposition the property as a commercial asset.
- Woodlink no longer proceeding with the $360m residential development Illoura House at 424-426 St Kilda Road, Melbourne, opting to sell this site.
- Parramatta Square by Walker ‘The Aspire’, was originally planned for 700 apartments plus 150 hotel rooms. Now it is an A grade office building comprising 100% office space and will be the largest commercial building in Australia
There continues to be a flight to quality for commercial property on top of more engagement from local and offshore buyers and a positive shift in property values and we foresee this continuing in the future.
The below graphs highlight the net face rental growth vs. total vacancy rates in the Sydney CBD, Parramatta CBD and North Sydney CBD which are having a flow on effect in the fringe markets.