Sydney apartment sales to stay booming through 2016

1.11.13Anyone with an apartment in Sydney will be heartened to hear the news that’s recently come from BIS Shrapnel.

BIS Shrapnel’s Apartments in Sydney Suburbs 2014 to 2019 report notes that the boom in sales of high-density, off-the-plan Sydney apartments is due to continue across the next two years. This is due to a combination of attractive yields, low interest rates and plummeting vacancy rates.

High-density apartment construction has been keeping pace with this demand. Such building approvals hit 20,354 in Sydney between March 2013 and March 2014, according to the report. The level of construction is expected to continue rising over the next two years, with dwelling approvals predicted to stay at just over 20,000 per year.

Low interest rates are an important driver of the high-density apartment demand. Presently, interest rates are at a historic lows, due to the Reserve Bank of Australia’s decision to hold the cash rate at 2.5 per cent for the last 10 months. The report, however, warns that interest rates may rise after 2016, putting an end to this.

BIS additionally found that the expectation of continued price growth for properties has also helped drive the demand for apartments. Unit prices are forecast to rise by 15 per cent up to 2016.

In fact, 2016 is expected to be the end point of this boom. Vacancy rates will start rising in 2016, according to the report, and sales will correspondingly slow down. However, BIS also insists that an oversupply of apartments will not emerge in this time.

For investors, between now and 2016 appears to be the optimal time to sell as demand for apartments in Sydney stays strong, prices are set to steadily rise and conditions remain tight.

Buyers will also take interest in the prediction that interest rates may well rise after 2016. Thus, while vacancy rates will get bigger, higher interest rates may offset this as a benefit to buyers.

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