After renting in Western Sydney for almost a decade, Dave Anderson fears his aspirations of buying a home in the region are becoming even more out of reach.
“Unless I suddenly win the lottery, I’m not going to own a house in Sydney,” Mr Anderson said.
While new free-standing homes are being constructed across parts of his neighbourhood, the 38-year-old public servant feels locked out of the market, due to a lack of affordable apartments.
“It frustrates me that people are like, ‘Oh you can’t build an apartment tower here’ and I’m like, why not?” he said.
“Western Sydney hasn’t filled up yet, there’s tonnes of space.”
Mr Anderson wishes more of Western Sydney’s land would be converted into new apartments versus houses. (ABC News: Monish Nand)
Despite the seemingly ample land, developers are deserting plans for new apartments in Sydney’s west.
Industry peak bodies and economists blame mounting construction costs and rising interest rates for the stalling of new projects.
‘Big problem’ with financing new housing
Urban Taskforce Australia CEO Tom Forrest warned it was “very difficult to make the finances stack up” for developing apartments west of Parramatta.
Tom Forrest explains the challenges of developing apartments west of Parramatta. (ABC News: Liam Patrick)
He said because of this, developers were focusing on the city’s east and north.
“We’re getting 22,000 approvals in Western Sydney over the last 12 months, but only 11,000 commencements,” Mr Forrest said.
Mr Forrest said this was because there were not enough purchasers willing to pay a price to cover the cost of building new apartments in the west.
“That’s a real problem, and it shows a big problem with feasibility that doesn’t exist in the eastern suburbs and on the north shore,” he said.
Developers are deserting plans for new apartments in Sydney’s west. (ABC News: Keana Naughton)
Interest rate rises inflaming feasibility questions
Last week’s interest rate rise — the first in two years — has only heightened concerns about the feasibility problem for apartments.
KPMG urban economist Terry Rawnsley said the impact of interest rate rises was two-fold — less consumer demand for apartments due to a reduced borrowing capacity, and greater difficulty for developers in getting the finance needed for projects.
“It’s probably going to be another factor that’s going to push more projects to the east away from Western Sydney,” he said.
Mr Rawnsley warned of the longer-term consequences of such a trend.
“If we don’t kind of see more of this affordable housing coming in Western Sydney, what we’ll start to see is more of a brain drain out of Western Sydney,” he said.
“People will be even priced out of those more affordable suburbs, so you’ll have people leaving Western Sydney, maybe going to Melbourne, south-east Queensland, Wollongong, Newcastle.”
Mr Rawnsley said the recent interest rate rise could push more projects to the east away from Western Sydney. (ABC News: Gavin Coote)
Government developer shelves plans for 1,500 homes
In January, government developer Landcom confirmed it had shelved plans for three housing projects in Western Sydney — that would have delivered about 1,500 new homes.
It cited “increased costs, including land acquisition costs” as the reason behind the decision, and that it would direct its funds into other nearby housing projects.
But Mr Forrest said Landcom’s withdrawal of those projects sent a concerning signal to the housing sector.
“If Landcom can’t make a project development work, no one can,” he said.
“If ever there was a signal to the government that they need to take action to reduce the cost of construction by reducing some of those fees, taxes and charges, well this is it.”
Persistently high construction costs are another factor detering developers from the west. (ABC News: Monish Nand)
Ray White Projects director Mark Bernberg said persistently high construction costs, along with layers of red tape, would continue to deter developers from the west.
“And I know developers have got this reputation of making too much money, but it’s really not the case in Western Sydney,” he said.
“A lot of these developers are either struggling, or sitting on the edge of bankruptcy.”Government spruiks developer finance support
The Minns government insisted it was taking steps to spur on more housing construction — in particular its Pre-sale Finance Guarantee scheme.
The scheme allows the government to act as guarantor for eligible housing projects to help developers secure finance lenders’ approval and fast-track construction.
NSW Planning Minister Paul Scully said the government had a “strong housing pipeline” for Western Sydney, with more than 10,000 homes declared ‘state significant’ by the Housing Delivery Authority.
“The Minns Labor Government is rebalancing housing, driving infill development close to transport, jobs and services so that housing growth is more fairly distributed across Sydney,” the statement said.
“By leading initiatives and reforms which cut red tape, we have helped save not only time but money by slashing lengthy planning delays.”