New supply additions have been limited across the CBD over the five years to 2014, growing by 576 apartments. 2015 was a high completion year with over 600 apartments increasing the total stock of CBD apartments to 5,581. The outlook for the CBD however is unprecedented with more than 7,000 apartments expected to be completed by 2021, more than doubling the current size of the market. This rapid uptick has been fuelled by major projects such as Barangaroo, redevelopment of office stock such as Goldfields House and the Coca Cola building on Macquarie Street together with the rejuvenation of precincts such as the Alfred Street region at Circular Quay. An influx of overseas developers and investors has set new expectations regarding the type and quality of developments as well as price.
Currently there are 1,800 apartments under construction across the Sydney CBD, this is equivalent to the total supply which was added to this market between 2007 to date. Over the last year, the Sydney CBD has not witnessed a strong increase in supply, despite growth in population and increased investment by overseas investors and high net worth individuals. In addition to the apartments already due to enter the market 3,000 more apartments currently are DA approved with an expectation of completion over the next three years. Historically not all properties which obtain development approval do commence and even allowing a 50% completion rate, this still will add more than five years of supply. The withdrawal of Brookfield Multiplex as builder for Greenland’s Bathurst Street development is a good example of new apartments completion being delayed.
Despite little new supply being added to the Sydney CBD over the past couple of years, the capital value increase has been significant. Unlike the broader Inner Sydney market, the over $1 million price point represents over 46% of all sales, in terms of number of sales this is 288 transactions. While this is a strong result for value, the total annual sales of 626 is approximately half of anticipated new supply expected to be added this year. Key projects within the CBD are expected to set new highs in values given their premium location. There is much speculation on the possible impact of restrictions to bank lending to foreign purchasers, who are expected to be a large proportion of the buyer pool.