Is Sydney’s property market heading to oversupply?

Unless you’ve been avoiding any form of media, you’ll probably be aware of the persistent worries over land supply in Sydney. Ensuring that enough vacant land is released is the cornerstone of new home building, and an obstacle that the Harbour City has come up against many times. Fortunately, this doesn’t seem to have dampened the prospects for construction in the months ahead.

New research from BIS Shrapnel suggests that the market could move into oversupply as the years roll on – and those taking out a home loan are sure to benefit. The Building in Australia 2015-2030 report shows that the volume of new home starts hit its peak in 2014/2015 and is set to decline in the coming years.

Dr Kim Hawtrey, Associate Director with BIS Shrapnel, said the level of dwelling commencements has soared to a record 210,000 over 2014/15, according to the group’s estimates. Record low interest rates and housing shortfalls in locations like Sydney have buoyed this activity. With conditions so strong, Dr Hawtrey highlighted that the national market could face an oversupply of properties over the next three years.

“Low interest rates have unlocked significant pent up demand and underpinned the current boom in activity, but as population growth slows while construction activity remains strong, new supply will begin to outpace demand,” said Dr Hawtrey.

Taking a turn for the better?

This is positive news for home buyers across the country, and could suggest that the market is on the cusp of a turn in favour of those purchasing a property. What’s more, the construction boom is expected to persevere in Sydney.

Home building activity has picked up significantly across New South Wales. Already, the state has seen a 1.9 per cent approval in new home starts in the March quarter, according to the HIA. Combined with the soaring number of approvals, the market is poised for a boom, but the Housing Industry Association (HIA) pointed out that the state government needs to support growth by fast-tracking land release.

“The provision of adequate, affordable, shovel-ready land is a crucial element to addressing housing affordability pressures across the residential property market,” said HIA Chief Economist Harley Dale.

“Removing the obstacles to affordable land supply is a core requirement of a successful taxation and federalism white paper reform process.”

The future is looking bright for home ownership in Sydney. If you’d like to make a start in the Harbour City’s property market, our lending professionals at Police Bank are happy to help you find a home loan that suits your financial needs.