Apartment Living: Approvals Improve in Sydney and Melbourne but More Changes Needed Say Developers

Apartment Living: Approvals Improve in Sydney and Melbourne but More Changes Needed Say Developers

The fourth quarter of 2010 has seen a promising rise in development approvals for units in both New South Wales and Victoria. In Sydney, the rate is currently sitting at almost 30% higher than it was at the same time last year and according to the Australian Bureau of Statistics, a record quarterly number of private sector units began building in Victoria in the March and June quarters of 2010. This year saw the construction of twice as many units than those started in 2009 and it has been the best year for new developments since the first quarter of 2004.

In Sydney and Melbourne, the number of units approved each month for construction has risen continuously since October 2009. Nationally, Victoria is now the state with the biggest number of apartment approvals. So far in 2010, 8235 units have been approved for construction in Victoria compared to 6898 in New South Wales, 4934 in Queensland, 210 in South Australia and 1321 in Western Australia.

The increase in approval rates is estimated to be generating up to $250 million for the Sydney region, which means over 1400 newly created construction jobs, great news for builders who are still recovering from the scaling back of government stimulus programs. Nationally, the revenue raised from these new developments will be over $1.2 billion.

With Sydney's population said to reach 6 million by 2030, the need for more apartments has never been more apparent. People living in Sydney, continue to embrace the apartment lifestyle and at this stage, nearly 60 per cent of all dwellings constructed in the greater Sydney area are units and experts say that this number will increase to over 75% in the years to come.

'People need to be confident that higher-density living doesn't come at a cost to the amenity of their area. These existing models demonstrate it can be done', says Craig Allchin, director of Six Degrees and professor of architecture at the University of Technology, Sydney.

ABS data shows despite financial constraints including stricter lending criteria post GFC, developers are still thriving. Utilising off-the-plan presales has given the industry some financial assurance and has allowed the approval rate to accelerate, showing that the strength of demand in both the Sydney and Melbourne markets has not diminished.

The rising approval rate can be linked to the government's Housing Affordability Fund which has invested $512 million over five years to lower the cost of building new homes. The HAF aims to increase the amount of new housing and make it more affordable for those entering the buyers market. It aims to address what the government sees as the two most significant restrictions to the supply of new housing: 'holding costs incurred by developers as a result of long planning and approval waiting times and infrastructure costs, such as water, sewerage, transport, and open space.'

The government has allocated funds from the HAF to create the software to enable online applications for development approvals. Electronic Development Assessments (EDA) are being implemented nationally in an attempt to speed up the application process, reducing the costs for developers, savings that the government hopes will be passed onto the consumers. The Australian Government has committed $30 million from the fund to develop the IT infrastructure and the software needed to develop the scheme. An additional $3.6 million has been allocated to develop and implement national standards for the online systems, which will allow the state, based systems to operate in a synchronized way. The Department of Families, Housing, Community Services and Indigenous Affairs has called on state and local governments to work together to find out how the planning system will be best implemented to effectively reduce planning time and costs for developments.

While developers have praised the initiatives of the fund, experts argue that developers are still not receiving enough support from local governments to ensure continued unit market growth. Proactive town planning measures and collaboration with developers on future sustainable projects is necessary to ensure sustainable living in our most densely populated city centres. In Sydney, where the rental market is at crisis point, developers are calling for a national standardization of rules that have been implemented in other states including; development applications to be automatically approved if the consent authority fails to deal with them within a stipulated time, as is the case in Queensland and stamp duty concessions for off-the-plan purchases of homes, as is the case in Victoria. Additionally they are requesting that developments meeting predetermined standards should be pre-approved and requesting that 'loss of trade' by existing businesses should no longer be a consideration to reject proposals.

Developers have argued that an increase in supply of unit style living is necessary in order to ease the rental crisis affecting most of our major cities and that it is in the government's best interest to speed up the approval process and prevent unnecessary time and costs being passed onto the buyers. Apartment living is a more affordable option for many first homebuyers and decreasing delays and costs in construction means making apartments an even better fiscal option for first homebuyers.

The growing strength of the Melbourne and Sydney apartment market reflects increasing buyer demand for unit-style accommodation. Developers understand that people want the flexibility and affordability of the apartment lifestyle but will not compromise on facilities or comfort. For first time homebuyers as well as investors, purchasing units off-the-plan is getting cheaper. In Victoria, the three months to September, the median entry price fell 1.3 per cent to $380,000 for a one-bedroom unit and 0.52 per cent to $526,250 for two bedrooms.

Ultimately, the ongoing housing stock shortages and increases in population growth will continue to ensure a constant and growing demand for any type of property but changing lifestyle choices, increased approval rates and improved internal designs will ensure the trend towards unit living continues to grow.

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