Having earlier given a brief overview of the apartment markets in the Sydney CBD, Northern Beaches and Eastern suburbs, this week I’m turning my attention to the interesting diversity of the North Shore, the Inner-West, Parramatta and Penrith.
Each of these markets might look very different, and that’s true to some extent however, they all share one common factor and that’s the big shifts in demographics which are driving development, although in different ways.
This then naturally drives buyer demand which has a fundamental impact on prices. That in-turn steers, as previously noted, a wide choice of developments across a big variety of locations, so that we witness a constantly changing and evolving market that I suggest defies a universal description or single trend.
However, before looking at each of the four markets, which I add only make up some of the areas across Sydney, it’s worthwhile reflecting how much the general residential market has shifted in the past 12-months. To do that briefly I’ve chosen headline auction clearance rates.
In February-March 2019 general clearance rates stood around 54%-66% more recently in February-March 2020 clearance rates have been as high as 84% and consistently above 75%. The 84% figure is impressive, and in part it’s due to the low level of listings. Two years ago, for 24 March 2018, there was a reported 3558 auctions listed. Last week the figure stood around 675 and that helps headline the reality of diminishing existing supply and that trend also extends to new supply and the same trend extends to the apartment market, and it’s a trend made more urgent by the Sydney-wide demographics I mentioned earlier.
The North Shore
The North Shore market was one of the first areas to ‘recover’ during the current up swing of Sydney’s residential market recovery, the area is one of Australia’s most popular and diverse.
The North Shore benefits from outstanding, diverse and well-established infrastructure, including the Metro which will only improve the area’s appeal as the line is expanded into the CBD and then beyond to Bankstown. The completion of the NorthConnex in mid 2020, is another big plus.
However, it is the region’s rich diversity of residential property and an evolving apartment market that combine to power the areas’ appeal and resilience.
The diversity of the apartment market extends from the North Sydney CBD along with its boutique focused neighbour Milsons Point and also includes Cammeray & Crows Nest to the north, McMahons Point & Kirribilli to the south, Wollstonecraft to the west and Cremorne to the east and in most of these areas we now see a new generation of apartment projects on varied scales, these locations are helping to create distinct neighbourhoods, including North Sydney, Milsons Point, St Leonards and Chatswood.
Demographic change is playing a big part in driving the North Shore which is not surprising given that the area is well established with mature residential markets ripe for generational recycling. This trend has also seen high-profile re-development of older strata-projects and sales of several adjoining homes to deliver prime sites for boutique townhouses and apartments.
Some pockets of the North Shore are now characterised by a lack of supply, once people find a location they stay, creating strong local demand and demand driven market.
There’s already evidence of a supply squeeze in some tightly held areas and this creates a good market for both developers and buyers, a lively and evolving residential market full of potential.
There are many reasons why more people are choosing to call North Sydney and its surrounding suburbs home. It’s first-class eateries, restaurants, bars and cafes have become the ideal meeting place for the precinct’s residents, tenants and business owners.
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The Inner-West shares two impressive credentials, the area’s popularity goes from strength to strength with both owner-occupiers and investors and the area is marked by very little new supply. For several decades across the region there was demand driven as one of Sydney’s leading areas for ‘gentrifying’ with prices below those of other areas like Paddington.
However, this trend has also made the area a big winner among apartment buyers inner Western suburbs. High and medium-density apartment projects have replaced old and run-down warehouse, commercial and industrial sites with a new generation of apartments all with easy CBD access.
This activity has been spread across suburbs like Annandale, Glebe, Croydon Park, Dulwich Hill, Enmore, Lewisham, Lilyfield, Leichhardt, Marrickville and Newtown.
These are all areas full of diversity and offering great lifestyle options while areas like Glebe have harbour access and along with suburbs including Newtown are in Sydney’s university hub. Most of the suburbs within this very popular region are characterised by modern and very progressively designed medium to high-density apartment projects. However, the areas popularity and focus on gentrification tends to limit supply.
The Inner-West also defies a broad-brush market description, and that diversity helps create constant demand which was further boosted by the quick completion of Sydney first light-rail. However, for the immediate future, limited supply will be the area’s main driving force and it’s reasonable to expect that some earlier stock including converted apartments completed over the past 20-years will soon be ripe for renovation.
The final two areas I’m looking at are Parramatta and Penrith, and both are very different areas beyond the 36kms that separates these two thriving markets.
Parramatta is a very young market and that’s partly explained by its attractive housing market which is more affordable both in terms of buying houses and apartments and the cities more affordable rents.
Another key factor working in Parramatta’s longer-term favour is its growing importance as Sydney’s so-termed second CBD. The area’s commercial success and acceptance will naturally drive the demand for apartments across both investor and owner-occupier stock.
Parramatta is also home to a sizeable concentration of ‘super-residential towers’. Affordability and easy access and very strong retail facilities will continue to drive strong rental demand. This is an important factor that will also encourage more owner-occupiers.
However, it is the link between Parramatta’s commercial success and it’s apartment market that is of current interest and will also be a key driver of future residential demand.
Published figures help illustrate this point because they indicate that the Parramatta market will see new office space (and hence employment) growing steadily, with 64,000 sqm from 2019, followed by more than a predicted 97,000 sqm in 2020 and then almost 74,000 sqm expected from 2021 onwards.
This activity is expected, even on conservative figures to attract some 20,000 additional workers, a trend that will add to Parramatta’s broad appeal as the area’s credentials as a fully-fledged CBD. More employment will drive the demand for apartments and that will see improved quality but still at competitive prices.
To some extent Penrith’s modern-day apartment market tends to fly under the radar escaping much of the attention focused on other Sydney regions. An area with considered potential Penrith is the last major suburb on the edge of metropolitan Sydney.
However, the region’s future over coming decades is going to shift away from its access to the delights of the Blue Mountains National Park to its stronger association with the new western Sydney airport.
Penrith’s current demographics is made up of a roughly equal balance across three groups; maturing established residents, the youth market and elderly singles.
The Penrith residential market is also driven by great access to education, a wide range of affordable housing, excellent sporting facilities, shopping centres, major new medical facilities and a national park nearby.
Penrith has a lot to offer and a number of new apartment projects have attracted strong support with much of the support coming from locals looking to move into apartments from the area’s housing stock. Locals have been strong supports of recent new off-the-plan projects.
This is a natural cycle with older residents look for the convenience of mixed-use and centrally located apartment projects. The Penrith home-buyers appears to be fiercely independent and loyal to Penrith.
East Side Quarter, Penrith – ESQ is Penrith’s most visionary lifestyle and residential quarter being developed by CABE (Also refer to main image).
Having looked at markets as diverse as the Sydney CBD, the East and Parramatta and Penrith there’s a lot of material to summaries to answer the question – where to now? So, I’ll have to defer my answer until next week.