Smarter Sydney: The Homes We Need and Where to Build Them

Published by: afr.com

As the skyline of Sydney’s up and coming suburbs start to reveal new life as roomier apartment buildings take up residency, the new residents that have plotted their way into a modern home they could afford look out toward Sydney’s skyline.

These homeowners taking stewardship of high density homes realise they are ahead of the game. Apartments are the panacea for Sydney’s affordability woes as this new breed of savvy homeowners realise they have managed to get into the market for as much as $500,000 less than the cost of a house with the same number of bedrooms.

Around them, the carnage of Sydney’s housing crisis takes more victims as mortgage stress reaches palpable levels. Affordability issues, painfully slow approvals for new builds, a cost of living crisis and stagnant real wage growth have combined to create the perfect storm.

The profound social and economic impact of the housing affordability crisis has resulted in a growing inequality in housing access. As property prices continue to rise, the widening gap between those who can afford or buy and those who are now openly admitting that they will never be part of the great Australian dream of home ownership becomes apparent.

Sydney’s median house price has reached a peak of $1.6 million this year and is tipped to rise further in an affordability crisis that continues to push homeowners into severe mortgage stress. Meanwhile, home buyers circling the market are realising that a modern three bedroom apartment is a viable alterative that still provides families with communal space and great amenities for around $900,000.

But a small army of private developers are fighting against the headwinds to support the national housing crisis.

Developers like the founder of Sydney development firm Andrew Hrsto has been pushing ahead to make home ownership a possibility amid a cost of living and housing affordability crisis.

Hrsto says high density living can make Sydney a better city – especially when new modern three bedroom apartments with huge living areas have been consciously and cleverly custom-built for the people who call them home.

Despite the odds, Hrsto has managed to build a business that can weather the storms and industry upheaval. He has mitigated the risks that come with being in development amid Sydney’s housing crisis by keeping everything inhouse to boast a 100 per cent completion rate well ahead of schedule for the last 20 years he’s been in business.

While Hrsto admits that investors have all but disappeared from the market amid the housing affordability crisis, but he sees a fair share of downsizers, first home buyers and families circling his developments in growing numbers in search of a home that will give them all the creature comforts of a house.

In-demand areas like Schofields, Merrylands, Campbelltown and St Marys are bristling with new life as families, young professionals and downsizers quietly get on with life in his modern apartments despite the lively debate around the importance of high density living.

“Buyers are much more savvy these days because they have all the information at their fingertips before they turn up to an open house, which keeps the developers honest. You’ve got to be the best of what you do. There’s no room for second place as a developer in this market.”

Ray White Group’s chief economist Nerida Conisbee says apartments frequently boast prime urban positions and carry lower maintenance responsibilities.

Conisbee points out that apartments also yield a good return on investment. On average, an apartment purchased at $500,000 in 2014 would have increased by 40 per cent to $700,400. In Sydney, an apartment would have increased by 37 per cent in the past decade, the data she analysed reveals.

But as the industry grapples with worker shortages, slow planning approvals and rising building costs, annual building approvals have dropped to the lowest in over a decade. The figures are particularly dire in the high density dwelling approvals space, which dropped 18.4 per cent in June, the lowest since July 2012.

Construction activity expanded by 1.2 per cent over the past year, says Master Builders Australia chief economist Shane Garrett.

“The civil and engineering sector has done the heavy lifting with growth of 4.8 per cent, which is a key area for maintaining economic growth. However, residential building activity is down 2.9 per cent over the past year, opposite of where we should be heading,” Garrett says.

Hrsto says ALAND is embarking on an exciting period, as many projects finishing and starting in Western Sydney are hitting the market. But it’s been a hard slog amid painfully slow planning approvals.

He wants to see planning reforms in NSW evolve to accelerate a program of deliveries that developers like ALAND want to bring to market to help solve the crisis.

“There’s a lot to consider when bringing new stock to market that’s affordable, including as higher interest rates, taxes, contributions, building reforms and the slow approvals process. Above all else, the market needs more supply so that we don’t have everyone fighting for the one unit,” he says.