The cost of constructing a new building in Sydney, Melbourne and Brisbane is comparable, so why is there such a dramatic difference in the price of apartments?
By mandating minimum apartment sizes in Sydney after the implementation of the SEPP 65, the result was an increase in the number of bright, large, luxurious apartments, absolutely – but only for those who could afford to live in them.
Developers immediately lost out on yield in their proposed developments and delivering projects simply became too expensive. This drove down supply and as a result, drove up prices to an unsustainable level.
The market is only just starting to recover now, not because of any reversal of the planning regulations, but because the lack of supply has driven property prices up so high that large one-bedroom apartments are fetching upwards of $700,000.
These inflated prices are the only reason why developers can now afford to develop projects which are in line with Sydney’s stringent rules and still offer viable financial returns. Basically, this means that without the inflated prices, developers could simply not afford to develop apartment projects under the planning laws, which has only further perpetuated the cycle of under-supply and market inflation.
The Victorian Government has now released the “Better Apartments” discussion paper. This paper seeks to confirm what every apartment occupier would want to hear: mandating bigger, brighter, cross-ventilated apartments with great outlooks. This all sounds great in theory, but what it fails to address is that this comes at significant cost.
Larger apartments cost more money to build and they also decrease a project’s overall yield. This means that the costs will all be passed on to the end user and this will affect the property for generations to come. Why should a young professional with a modest budget be confined to the outer suburbs where they will potentially be cut off from the life they have enjoyed living, all in the name of owning a property?
Why should the industry not be able to provide smaller, well-designed dwellings that do not compromise living standards, in order for residents to have access to the amenities they want and the transport infrastructure they need?
Apartment living should be a choice, available to the masses, rather than just the rich, and the introduction of SEPP 65 in New South Wales proved that affordability suffered hugely as a result, causing the market to come to a grinding halt.
The population in New South Wales is projected to grow by 100,500 per year until 2031. The current rules make it incredibly hard to find a feasible development site and lack of supply has driven land prices up. If we continue to build outwards, rather than upwards, the younger population will have no choice but to move out of the city. Is this fair?
We need to address affordability and we can use New South Wales as a test study into why planning policies play such an integral role in regulating market supply and median prices.
Sydney’s planning scheme is overly prescriptive and complicated. The outcome has delivered large apartments, yes, but you need to be a millionaire to afford one. There is no such thing as an affordable apartment in Sydney.
Let us not see history repeat itself, let us protect the future of our property market for all residents – not just those who can afford to part with $700,000 for a one-bedroom apartment.
Craig Yelland is a Director of Plus Architecture. With offices in Sydney, Melbourne, Brisbane and Christchurch, Plus Architecture is considered one of the leading architectural firms in multi-unit residential development.
Story source: www.domain.com.au