Sydney faces apartment construction slowdown as developers hit the brakes
Posted
Stine Baska moved into her Epping home two years ago.
Key points:
- There has been a 36 per cent drop in apartment approvals over the year to April
- Projects put on hold have increased by 110 per cent in the past year
- Developers say they’re now looking at commercial construction over residential
Back then, a display office across the road was advertising a new apartment complex nearby.
A group of houses had been fenced off and were set to be demolished to make way for the development.
Ms Baska even received a glossy brochure of what the units would look like.
Today, the fence and the homes are still there, but the display office is gone.
“Nothing has happened,” Ms Baska told the ABC.
“It’s a shame.”
The spotlight is on Sydney’s construction industry after an apartment block in Mascot was evacuated on Friday night over concerns about cracks in its basement beams.
It comes amid calls by the property industry for greater scrutiny and inspections of new developments.
Meanwhile, situations like Epping, about 20 kilometres north-west of Sydney’s CBD, are unfolding in several parts of the city as Australia’s property market slows.
According to Steve Mann, the Urban Institute of Australia chief executive, the number of “deferred and abandoned” apartment projects in Sydney has increased 110 per cent in the past year.
“That’s 40,000 to 50,000 apartments,” he said.
In Cronulla, another Sydney locale that has seen significant development, apartment prices have dropped by 12 per cent over the past year.
Developments in areas more than 10km from city centres are seen as the most vulnerable, experts say, with many finding it more difficult to attain financial closure as investors are constrained and prices fall.
“The market is very challenging for new developments,” Mr Mann said.
“We’ve also seen nearly two years now of price declines, record price declines, and that’s very challenging in terms of jobs and supply of new construction.”
The figures don’t lie.
According to the Australian Bureau of Statistics, 44,762 units were approved in NSW in the 12 months to April 2017 — when the state was in the midst of its property boom.
In comparison, 28,618 units were approved for construction across NSW in the 12 months to end of April this year — a 36 per cent drop.
The ABC understands several Sydney residential-focused builders have been laying off staff, with companies forces to pivot into other areas of the industry or focus on the commercial sector.
Developer Phillip George, the founder of Potter George Group, has 15 projects in the pipeline worth around $1 billion.
Five years ago, 50 per cent of his projects were residential — today it’s only a third.
Mr George, who is involved in both residential and commercial development, said the combination of the banking royal commission, restrictions on foreign investment and Sydney’s saturated residential market led him to make an important business decision.
“You’ve got to fish where the fish are,” he said.
“Our rate of sales for residential is not where we want it to be, so we moved away to [focus on] commercial.
“It’s all about making money at the end of the day, we’ve all got bills to pay, and right now commercial is a far more viable option.”
As well as having a major impact on the residential construction industry, the slowdown will hit tomorrow’s NSW budget.
In December’s mid-year budget update, the NSW Government revealed it had slashed $8 billion in expected stamp duty revenue.
According to Hornsby Shire Council, which oversees much of Epping’s development, the project next to Ms Baska’s house still has an active development application pending.
“No construction certificates have been received by council so we are unaware whether they wish to activate that development application,” a spokeswoman said.
Ms Baska’s neighbour Terry Lewis, who has been living in the neighbourhood for 20 years, said it was a double-edged sword.
“Thousands of units have been built, too many I think,” he said.
But he said it felt like “a breather” to have no development on the site.
“As you can see, it’s abandoned. Have a look.
“There’s only bush turkeys [that live there] now.”
Topics:
business-economics-and-finance,