According to latest figures from the Australian Bureau of Statistics (ABS), dwelling approvals in NSW have started to slow down, particularly within the apartment sector which is not helping the state’s major housing undersupply issue.
Between the three months of July and October 2016, apartment approvals fell by 12%. In July 2016, 4,105 new apartments were approved in NSW, whilst October saw a reduction with just 3,620 new apartments approved.
It’s not just apartment approvals that have fallen. Housing approvals have also fallen, but not as much as apartments. In July 2016, there were 6,500 house approvals compared to 5,945 house approvals in October.
Urban Taskforce CEO Chris Johnson stated, “There are a number of signals from the NSW Government that are likely to add more costs to developing apartments and houses and this will add uncertainty to those investing in new housing.”
New Housing Levies
One of these signals is the release of the District Plans by the Greater Sydney Commission which has identified various new housing levies. The District Plans also propose an affordable housing levy of up to 10%. Although this will help with Sydney’s out of control house prices, this will force up property prices within the other 90% of new homes.
There are also statements about Value Capture levies. We also need to consider the tougher lending restrictions that developers are facing, meaning less developers are being approved finance by lenders, and therefore unable to proceed with their residential development.
Mr Johnson also adds, “On top of this the NSW Minister for Planning is encouraging changes to Negative Gearing that would reduce the investment interest in new homes that are needed for the rental market and potential changes to the BASIX sustainability program could lead to additional building costs.”
2017 will have a lot more uncertainty about it due to the broad District Plans being discussed and what planning rules will actually apply.
36,250 New homes required for next 20 years
It has been forecast by the Department of Planning that an average of 36,250 new homes are required every year for the next 20 years, or alternatively 725,000 new homes by 2036. However, the highest production has been 30,000 for last financial year, which does not meet the required quota.
Sydney is currently facing an undersupply of new property due to its growing population; however, all of this uncertainty around the District Plans, Affordable Housing levies, Value Capture levies, Council Amalgamations and potential chances to BASIX might actually impede construction progress.
41,500 new homes a year would be required under the state government’s high growth scenario. Instead of new taxes, levies and an uncertain planning environment, Mr Johnson believe what NSW needs is policies to help stimulate more housing production.
Severe undersupply of new dwellings in NSW
NSW has experienced a severe undersupply of new dwellings over the past decade. And with Sydney’s population growing faster than predicted, this is putting increasing pressure on the city’s already stretched housing and transport requirements.
According to government figures, Sydney’s population is forecast to grow by over 2.1 million in the next 20 years. This is approximately 170,000 more than what was predicted in 2014. By 2036, the population of NSW is expected to increase by 2.7 million, where the state will see almost 10 million residents. The five key drivers of Sydney’s population growth come down to the following:
- Overseas migration
- Internal migration gain
- Internal migration loss
- High fertility rate
- Ageing population
Property is already extremely expensive in Sydney and is unaffordable for many. With increasing costs this will only put property further out of reach, especially if the supply of property remains lower than required. We need to be building more housing to support our future residents, increase housing supply and to bring down the price of property.
To find out more about buying property in NSW and which suburbs are the best places to invest in right now, why not get in touch with iBuyNew to find out more. Speak to one of our friendly Property Consultants by phoning us on 1300 123 463
Published on 15th of December 2016 by Marty Stanowich