UDIA report shows tackling housing supply must be top priority for new NSW Labor Government
UDIA’s national flagship State of the Land 2023 report released today at the UDIA National Congress, revealed that NSW is facing a deepening housing supply and affordability crisis, the worst of all Australian markets. The new housing market downward trend in Sydney was led by a cliff-fall in apartment sales of -56% and greenfield land sales of -44%.
“A further drop in Sydney’s new residential supply completions is forecast in 2023 to around 20,500 dwellings, driven by further contraction in multi-unit production, which is already down 64% on the decade average. Tackling the supply of housing is now beyond critical and has to be the top priority for the new Labor government in NSW,’ said Steve Mann, CEO, UDIA NSW.
The report points to a perfect storm of rising interest rates, construction cost increases and supply constraints which are driving up home prices and continuing to make Sydney’s housing market the most expensive in Australia. Combined, these are deterring first home buyers from entering into the current market.
The Sydney Pages from the State of the Land Report can be found at this link
Sydney New Residential Market Supply
Source: UDIA, CoreLogic, Research4, ABS
Note: The forecast includes completions and forecasts for greenfield and multi-unit markets, not small scale in-fill developments and knock down rebuild.
The report shows a total of 6,374 annual greenfield lot releases, which was 35% lower than 2021 and 27% lower than the decade average. Industry confidence fell significantly through the second half of the year recording a three-year low of 1,742 sales.
Sydney’s median lot price skyrocketed 31% during 2022 to $716,000, which was the highest growth across the capital cities and the largest annual growth in pricing since 2015.
According to State of the Land research partner, Research4, “The Sydney Greenfield market’s significant drop in activity levels is largely being driven by issues pertaining to affordability and consumer confidence. The Sydney markets price points are now significantly out of step with the broader housing markets price points. There is no sign that this setting will change over the short term.”
Median Lot Price, Land Price ($/sqm) Median Lot Size
Source UDIA, Research4
Sydney’s newly constructed units remain the most expensive in Australia, with the median new sale price currently 18% higher than Melbourne and 33% higher than the combined capital city average.
The median unit sale price held in value, falling just 2% across the year to a median price of $760,000 – making it 41% more affordable than the median value for new houses, which is more than two times higher than the average difference over the last decade.
Supply in the multi-unit market is clearly tanking across Greater Sydney, which has seen a 50% decline from the historic peak supply of 31,840 units in 2018.
The problem is set to get even worse, with approvals for multi-units falling by 18% across the year and commencements falling by 27%, underscoring the report’s prediction of a prolonged period of reduced supply ahead.
Sydney Median New Unit Price & Annual Unit Completions
Source: UDIA , CoreLogic
In terms of NSW home values, State of the Land research partner CoreLogic commented:
“NSW has seen the largest decline from peak of the states and territories, falling -12.3% between April 2022 and February 2023. Sales volumes have also seen more extreme cyclical movements, down -30.4% year-on-year, compared to a -21.4% fall nationally.”
Spotlight on the Regions
Regional NSW has followed a similar trajectory of declining residential activity and momentum as Greater Sydney across 2022. Regional NSW sales of both detached and multi-unit stock have plunged to decade lows, with approvals also trending sharply downward.
Source: UDIA, CoreLogic, ABS, SQM
“Apartments are the key missing sector in the NSW housing market and are also the pathway for better affordability. The new NSW Labor government acknowledged the need to deliver more housing as part of their election campaign and turning this around in 2023 will be the key to supply and affordability in the later years of their four year term,” said Mr Mann.
“If aligned with the Federal Government’s National Housing Accord, there appears a genuine opportunity to address housing supply in NSW in mixed tenure projects. However, the challenge remains to support supply now and provide incentives for affordable housing on private land,” he added.
The full UDIA National State of the Land Report 2023 can be found at this link.
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Deanna Lane 0416 295 898 or firstname.lastname@example.org