The Department of Planning, Industry and Environment (DPIE) recently released new housing forecasts for Sydney. Despite industry views about the emergence of a two-speed market, the new forecasts point to apartments continuing to be the major contributor to new housing production.

Discussions within the development sector are tending to focus on the plight of the apartments market with completions down by more than 40% from the 2018 peak . Even prior to COVID there were significant falls in apartment completions (almost 30%). Both the housing and apartment markets experienced similar downward trends throughout COVID. Towards the end of 2020 and the beginning of 2021, it is evident that the falls will stabilize (as reflected in both approvals and commencements). There remain challenges in the development sector especially when Homebuilder ends and the “bring forward effect” is fully appreciated.

Urbanised produces indices from the DPIE forecasts. Over the next five years, unsurprisingly, it’s the larger Councils that are predicted to contribute most to new housing stock:

1.      Blacktown
2.      Parramatta
3.      Sydney
4.      The Hills
5.      Cumberland

While there will be continued greenfield production, apartments will remain the major contributor to new housing delivery.

Often, these forecasts are a little misleading as the largest Councils are always the biggest contributors to new housing stock by virtue of their size. Urbanised, has adjusted the figures by overlaying population forecasts. This gives a proxy of the Councils that are contributing to growth in real terms. The Councils forecast to experience the highest relative growth in new housing over the next 5 years are:

1.      Burwood
2.      The Hills
3.      Sydney
4.      Camden
5.      Lane Cove

While Camden is an exception, most of the Councils above that will proportionately bear a greater share of new housing stock appear to be focused (again) on apartments. Lane Cove through the St Leonard’s Precinct, Burwood through the major town centre projects and a great deal of apartment activity throughout the Hills will see these municipalities carry the largest relative production loads.

DPIE’s forecasts seem to suggest that there has been no structural market shifts from the economic shocks that have recently been experienced. Although it must be said that there is 30% margin of error between the scenarios.

Urbanised believes that there have been shifts in the market whereby people will prefer larger apartments, townhouses or stand-alone houses. There will also be a greater number of households with people working from home. Developers will meet these shifting preferences with innovative design solutions. We tend to agree with the DPIE in as much as there will not be a structural shift in markets.

There is however a real risk at play that could materially impact on the market. Developers appear to be delivery focused at the moment. There are few available subdivision sites on the market and few large sites available for apartment development. There is a distinct possibility of a land supply crunch later in the year which could impact on a market recovery. Unless more land is approved for development quickly, chances of meeting (even) the low case scenario forecast may be in jeopardy.