Sydney's apartment building boom is hitting new highs even as prices start to fall

WILLIAM WEST/AFP/Getty Images
  • Unit prices in Sydney are falling.
  • Total units under construction in NSW hit the highest level on record late last year.
  • There are 16,786 units approved but yet to begin construction across the state, the second highest number on record.

Home prices are falling in Sydney, including for units.

According to data from CoreLogic, apartment prices in Australia’s largest and most expensive housing market fell by 0.9% in the first three months of the year, seeing the increase on a year earlier slow to 1.9%.

If the chart below is anything to go by, there could well be further declines to come.

Created using data from the Australian Bureau of Statistics (ABS), it shows the number of other residential dwellings currently under construction in Australia’s most populous states — New South Wales, Victoria and Queensland.

The vast majority of these are units.

While dwellings under construction are now starting to fall in Victoria and Queensland following years of strong growth, the same definitely can’t be said for NSW.

In the final quarter of 2017, there were 68,032 other residential dwellings under construction across the state, largely reflecting the booming level of apartment construction currently in Sydney.

That’s not only a new high, surpassing the 66,699 record set only one quarter earlier, but also double the level seen just five years earlier.

And there are more apartments in the pipeline to come.

According to the ABS, 16,786 other residential dwellings are already approved but yet to begin construction during the quarter, the second-largest level on record.

The high-rise building boom comes at a time when many predict unit prices in Sydney are likely to fall over the next couple of years.

While building of this magnitude will help to put downward pressure on prices, potentially improving affordability for those looking to enter the Sydney market, it also raises legitimate questions about potential settlement risks for units purchased off the plan when prices were increasing rapidly.

Given the huge addition of new supply, coming at a time when prices are already falling and expected to fall further, this is definitely an area to watch closely.

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