The increase in house values in Sydney will only produce a flow-on effect on for apartment prices for the year said veteran developer and Meriton group founder Harry Triguboff.
Triguboff who has built more than 70,000 apartments to date said that high house prices were driving demand for apartments from owner-occupiers and tenants, resulting in stronger than expected gains already his year.
“Sadly, many mooted projects that were due to start by other developers have not, and some of them never will start due to regulatory and financial restrictions.
“Unless developers have plenty of equity and an influential book of strong pre-sales, the banks won’t bankroll them and sites will sit derelict.
“One of the biggest problems is the banks and other funders, under government pressure, have curbed lending to foreign buyers.
Triguboff’s comments come in the wake of CoreLogic reporting that Sydney house prices rose by 15.5 percent last year and that they had advanced by a further 2.7 percent in January.
Last week Urban Taskforce chief executive Chris Johnson said that Sydneysiders had to accept that their future was in apartments rather than houses.
He said the supply of new apartments was not enough to meet the market, with an estimated 37,000 needed a year when only 31,000 built last year.
“At our peak, we are still behind the average.
“The government, Greater Sydney Commission and Councils must focus on housing supply and maximising density in established growth areas.
“Under-development of these growth areas will stagnate this land for 50 years or more before it can be redeveloped, which will only place pressure on suburban and employment areas to accommodate the shortfall in supply.
Triguboff said the rise in Sydney apartment prices stalled for a period last year when banks tightened up on lending, a measure which caused a glitch for Chinese buyers of Sydney apartments.
“We seem to have worked our way through that situation, foreign buyers are again very active, lending to investors is up, and we are pleased to see many more Australians buying apartments.
“There’s no doubt that the low-interest rates, from two angles, are a significant factor.
“For many owner-occupiers, the cost of money means buying is cheaper than renting.
“For investors, the return on renting out a new apartment is much better than depositing it with a bank.”
James Sialepis, Meriton’s director of sales, said from a sales perspective he wished there was more stock to sell.
“Buyers are transitioning into new apartments because of the quality, design and amenity provided.
“Childcare, retail hubs and parklands in accessible locations are necessary inclusions for buyers and renters today, things which older developments cannot offer.
“We expect to sell 2000 apartments this year, but that number could have been higher if developments were able to get approvals faster.”
Sialepis said Meriton had a rent roll of more than 6000 apartments and the vacancy level was negligible at 0.06 per cent.
“There’s strong competition between would-be tenants for rentals.
“We are signing leases at a record rate of 100 or more a week, which means our investor buyers don’t have an asset sitting empty.
“We effectively produce an income for them from day one.”