NSW MARKET OVERVIEW
NEW SOUTH WALES
NSW Market Overview with Demi Carigliano
What were the key market trends occurring throughout 2023 in your region? 202 3 was a very strong period throughout the Inner West and South of Sydney, spurred by low cost of debt and ease of accessibility of capital. This drove the investment market to continue to perform well, though increasing cost of construction significantly slowed the development market. With the value for completed residential stock having slowed and in some markets fallen, a 30% increase in construction costs across the board made development site sales difficult to substantiate. 2023 was a very interesting period in the Inner West & South Sydney, spurred by an increased cost in borrowing of debt and a still increasing construction cost for developer which in turn allowed developers to pull back in purchasing. This has seen a lack of purchasers coming to the market and presenting aggressive bids – currently the flight to quality is where buyers will be still aggressive however the problematic and less desirable sites are struggling. What have been the fundamental drivers of demand amongst buyers in the last twelve months? Throughout 2023 buyers still had a ‘fear of missing out’ which I believe peaked in November 2022. However Commercial auction clearance rates are very low, with a number of properties we
were marketing selling via expressions of interest rather than Auction. This was mainly due buyers becoming more picky in their bidding stance and prefer time with due diligence periods to finalise their debt position and construction quotes. The start of 2023 has been in stark contrast to this, with purchasers now much more wary of deploying their capital, instead seeking to ‘watch and see’ how the Reserve Bank’s change in monetary policy impacts the market. Reflecting on recent transactions, what has been the profile of buyers and has this shifted from previous years? Most recently we are seeing local purchasers dominate the market. Offshore capital into Australia has slowed significantly, with established private purchasers (both developers and investors) being the most aggressive in the market. Interestingly we are starting to see many of the overseas Asian investors who entered the market over the past 3-4 years sell assets and repatriate funds back to their local overseas origin. What types of sites are most in-demand given the current strong residential housing market? Low density and medium density development sites remain by far the most sought after. In particular, house and land opportunities and townhouse development sites which are targeted towards owner occupiers continue to achieve record high sales prices.
DEMI CARIGLIANO Director Joint Head of South Sydney Knight Frank Australia
26 – April / May 2023
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