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Translating Sydney’s Dwelling Construction Boom For Investors

dwelling construction boomIn a recent article for the Property Update, Pete Wargent talks about the boom in dwelling constructions in Sydney. I ditto his opinion that the construction frenzy is a certain cause for cheer for the RBA. After all, the plan to bring down cash rates was meant to pep up dwelling constructions in the first place. If you are a buyer, ready to play the waiting game, Wargent does not mind you buying into these new dwelling units but what does he propose for the investors?

Construction boom in Sydney succeeds years of undersupply

Sydney undoubtedly needs all the dwellings that it gets. Years of undersupply had created a chronic housing shortage in the city, the effects of which are only now beginning to drift away.

With over 60,000 people added to the kitty of city’s population annually, each block in a locality will give the impression of being under construction, says Wargent.

Investors should look elsewhere though

For the moment, he infers, investors will do well not to concentrate here and focus more on certain suburbs with “established stocks”.  The true bang for the buck should actually lie there. The suburbs Wargent talks about should ideally be a little away from CBD (but not too far away either).

Paucity of available land will be the key

Any suburb which has got paucity of available land for release and has a cap on tower heights will hold back population growth effectively. These, more than others, are the ones investors should be on the lookout for.

You can read the original article here.

As a first, I will congratulate the construction industry for getting busy once again. It also means that the skilled labour force migrating to Sydney will be better employed and in return, they will create better housing for us.

Strata by laws for older units

A little off the note, I will like to caution those buyers who are interested in buying older units. It is because changes in strata by laws (effective from July 2014) will mean that developers can take their lots from them for redevelopment with only 75% vote in their favour (instead of 100% as was the rule in the past). Such investments will of course be rooted in peril now.

Nice tussle developing between detached houses and units

It’s great that unit apartments are looking to give a keen tussle to detached houses once more. Their value growth in the last 5 years has been 0.3% more than that of detached houses and it will be interesting to see where real investment worth lies in immediate future.

For the year 2014, which of the two will register greater value growth- detached houses or units?