Sydney off-the-plan apartment sales slowing

Sales of off-the-plan apartments are slowing down in some parts of Sydney, in line with the auction market.

Blaming a tightening of lending rules to investors, project marketers CBRE told its end-of-year briefing to clients on Wednesday night that there’d been fewer sales over the second half and that the median price had dropped 7 per cent. 

“In areas of high supply, where prices have been going up, there’s not going to be that same level of growth going forward,”  David Milton, managing director of CBRE residential projects said later.

“Some people [developers] have been pushing to the next level on price, but that won’t be as available.”

Despite the median price falling, CBRE’s average sale price has actually increased due to more top-end sales as high as $22 million.

In the eastern suburbs where one development, Omnia in Potts Point, had recently achieved an extraordinary $62,000 per square metre, Mr Milton said prices would continue to grow “quite well and have reasonable capital growth”. 

“For buyers, it will be more of a normal market with more steady price growth, but prices still won’t be going backwards.”

Developers are also reporting that later stages of popular blocks such as Central Park aren’t sell-outs.

Rather than the 100 per cent sales figures that were achieved in earlier releases, property developers Frasers Property Group and Sekisui House announced that the latest stage of Central Park at Chippendale achieved 67.5 per cent of sales. Of the total of 313 apartments in the two-tower DUO project, designed by Foster + Partners, 211 sold.

But Frasers Property sales and marketing director Paul Lowe said he was pleased with the outcome. “It’s a sensational result to sell over $200 million [worth of property] in this market with a product in Chippendale,” he said. 

“We’ve had people saying it didn’t sell out, but we don’t fluff the figures by advertising and selling six months prior and then saying it’s a sell-out. That’s the result of just a five-week advertising campaign and we only started advertising two weeks prior in Hong Kong and China.”

Investors made up 60 per cent of the buyers, Lowe says, but CBRE report that, in their business, they’ve found the number of apartment sales to investors plummeting 73 per cent from a peak in the second quarter of 2015 to the last quarter up to November 30. With less fierce competition in the marketplace, lower-priced apartments in areas of high supply are taking much longer to sell.

Some locations will continue to thrive, though. There’s still little stock in the eastern suburbs in particular, Milton says, which will keep prices moving strongly upwards. The $11 million penthouse sale at the new Omnia development in Kings Cross, for example, recently set a new Sydney record for the apartment price per square metre of that $62,000, eclipsing the previous square-metre prices of $43,589 and $41,368 achieved by apartments in The Residence on Hyde Park, and the $27,500 per sqm of the super-sized $22 million penthouse at Bennelong on Circular Quay.

This weekend’s launch for sale of the 46 apartments to be created in the eight-level heritage 1800s building The Revy on Darling Island could possibly come close. “There’s been a lot of interest in that, and it could fetch the same kind of money as Omnia,” Milton says.

“The high end of the market in iconic locations is going to be one of the strongest sectors over the next few years. Sites like these just aren’t available and don’t come up very often. People move quickly to secure them.”

With a lot of big top-price sales this year out of a total 3013 to the end of last month, CBRE’s average apartment price has risen from $958,000 at June 30 to $1,033,000 now. The median price – the middle price of the range – however, has slipped 7 per cent from $911,000 to $845,000.

The highest prices per square metre were in the eastern suburbs, McMahons Point, the CBD, Neutral Bay, Chatswood, St Leonards and Redfern, all areas close to transport with well-established infrastructure. Overseas Asian purchasers are increasingly opting to buy the best apartments in those choice areas too, he says, moving from bargain-hunting to quality properties with long-term capital growth potential.  But some of the best value buying for the future will be in the west and at Green Square, Milton believes. “There’s some good bargains in western Sydney, like in Parramatta.

“Green Square also represents terrific value with so much good infrastructure now being built and, when it’s completed, that’ll be a major destination, with increased property prices.”

Investors who’ve been hard hit by the APRA changes will,  Milton believes, be back soon. They’re biding their time and re-evaluating their options, but with the share market uncertain, property will be their best bet, with new apartments offering good depreciation tax benefits.

“And people like off-the-plan purchases as they offer so much opportunity,” Milton says. “Buying now gives you plenty of time to sell other property and, it’s just like new cars – people love new, more innovative designs and changes in finishes and trends.”