Pyrmont - Rental and price growth to drive more investors to Sydney inner city apartment market: BIS Shrapnel's Angie Zigomanis
reposted from: http://www.propertyobserver.com.au
By Angie Zigomanis
Wednesday, 24 July 2013
Wednesday, 24 July 2013
Page 2 of 2Contrary to perceptions at the start of the apartment construction boom in the mid 1990s, the positive performance of the Pyrmont and inner Sydney apartment market has been driven by various factors that were not immediately apparent at the time:
The rise in overseas student enrolments at Australian universities; globalisation of employment that has resulted in growth in overseas professionals employed in our cities; and changing lifestyle and dwelling preferences that have seen the younger adult population more willing to live in smaller dwellings closer to employment and entertainment options.
The result has been a growing population that has a preference for living in inner Sydney apartments, which has been able to sustain apartment occupancy despite the sizeable increase in the apartment stock.
Pyrmont has experienced a fourfold increase in its apartment stock from 2,300 apartments in 1996, to 9,500 apartments by 2013, while still maintaining solid occupancy and positive rent and price growth through this period.
Although there will continue to be cycles, these drivers are expected to continue to underpin long term demand for inner Sydney apartments in the future.
In the short term the underbuilding of apartments in inner Sydney since the middle of the last decade has resulted in an underlying deficiency of apartments that is not expected to be fully eroded in the near future, despite the solid upturn we are now seeing in new apartment construction.
The resulting rental growth will continue to attract more investors to the market.
This in turn should drive further solid price growth over the next two to three years, which in turn will drive greater off-the-plan purchases and additional supply.
After averaging 2,500 apartment completions per annum over 1996/97 to 2005/06, apartment supply has fallen to around 1,600 new apartments per annum over 2006/07 to 2012/13.
While completions have picked up in 2012/13 and we expect them to average 2,800 per annum over the four years to 2016/17, there is still expected to be a small underlying deficiency by the end of this current round of construction.
Angie Zigomanis is senior manager of BIS Shrapnel.
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