| 26.07,18. 05:46 PM |
'Zombie blocks' to pull Sydney apartment prices even lower
Photo: A new department developement in Sydney, one of many across the state. (ABC: John Gunn)
Sydney's falling apartment prices look set to continue into the next decade, with leading economists and real estate analysts predicting ongoing construction and the rise of so-called zombie blocks will pull prices lower.
The prediction comes as new figures from real estate website Domain released today show the average apartment price in the Harbour City dropped 3.5 per cent in the 2017-18 financial year to $737,080 — the sharpest annual decline since the global financial crisis.
The falls are being driven in-part by continued apartment construction in NSW, with Australian Bureau of Statistics figures released earlier this month showing more than 66,000 apartments are under construction across the state.
An estimated 20,000 apartments are lying vacant in NSW, with the empty homes labelled "zombie blocks" in the industry.
Falls set to continue
Sydney-based SQM Research director Louis Christopher said the city's apartment prices were "nowhere near the bottom".
"To what magnitude, we don't know yet," he said.
"But they'll continue to fall."
Mr Christopher said two likely scenarios would play out in the Sydney market — either a "sharp fall" or a longer "stagnant period" similar to what was seen in the Sydney market from 2004 to 2012.
"This downturn is more than a restriction of credit," he said.
"It's more becoming demand-related. Investors don't want to catch a falling knife."
Cameron Kusher at real estate analyst firm CoreLogic also believed the falls would continue.
"The Sydney market on our data had been down for 12 months and there's real stretched affordability out there," he said.
"There's tighter availability of credit and people don't have the same borrowing capacity."
The Domain figures also show Sydney's median house now sitting at $1.144 million, down from its peak of $1.198 million in June 2017.
Mr Kusher said according to CoreLogic data, prices for apartments and units were holding up better than as they were more affordable — but that may not last.
"There's a lot of stock (apartment) sitting there, and that would suggest rents and apartment prices will continue to fall."
'Zombie blocks' trigger new pressure
In a seperate report out this week, BIS Oxford predicted New South Wales would see falls in apartment blocks of up to 26 per cent over the next two years.
The report said Victoria was set to drop by 29 per cent, Queensland 15 per cent and the ACT 27 per cent.
It came as the New South Wales Government continued with plans to build 61,000 houses on average each year to 2021.
The Berejiklian Government has long been grappling with the issue of housing affordability and population growth in Sydney, and believes it could ease the problem.
To achieve this, the Government is working to have 90 per cent of housing approvals determined within 40 days by 2019, and a big rezoning push is also underway.
The drive to fast track development has met pushback from local communities opposed to high and medium density growth in suburbs that until now, have primarily remained low density areas.
Over the next 20 years in greater Parramatta there are plans for more than 72,000 new homes.
Similarly, in Sydney’s North West around Riverstone, Rouse Hill and Marsden Park, more than 33,000 new homes will be built by 2026.