Developers and Investors Take Note

A master plan to cater for a forecast 40 per cent jump in Sydney’s population by 2036 has been unveiled by the New South Wales Government. The plan is based on projections that the population in the nation’s biggest capital will grow from 4.28 million in 2006 to nearly six million in 25 years. And the number of Sydney homes will increase from 1.68 million in 2006 to 2.45 million in 2036, an increase of 46 per cent.


COMMSEC’S REPORT

The performance of the NSW economy continues to be restrained by the construction sector – both new home building as well as commercial and engineering activity. But high population growth relative to decade averages points to the need to build more homes in coming quarters. Business investment in equipment & machinery is strongest in NSW of the states & territories – either compared with “normal” levels or annual growth rates. The NSW economy has potential to strengthen further as the effects of the global financial crisis continue to recede. But weak construction activity is a key factor holding back economic momentum and needs to be addressed.

Sydney investors could enjoy strong returns in 2011, according to SQM Research.

Figures released this week by the property research house show Sydney could enjoy robust rental growth of between five and 7 per cent heading into 2011.

Melbourne investors on the other hand, are not expected to enjoy the same level of rental growth, with the capital city expected to record benign growth of 0 – 2 per cent.

SQM Research managing director Louis Christopher said the expected mundane growth rate in Melbourne was a consequence of the ample vacancy rate in the capital city.

While the rest of the nation was still experiencing a fairly tight rental market of 2.2 per cent, Melbourne recorded a vacancy rate of 3.6 per cent.

“A national vacancy rate of 2.2 per cent is still relatively tight. Generally speaking it is an undersupplied rental market when vacancies are below three percent. Between three to four percent, it is a market in equilibrium. And at over 4 per cent it starts to become an oversupplied market,” he said.

“So based on our measurements, we believe the cities of Sydney, Canberra, Hobart, Perth and Darwin are bordering on being in equilibrium.

“Melbourne is also largely in equilibrium, however the supply of new apartments hitting the market in 2010 have contributed to an increase in supply and we think that may continue into 2011.”

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