Sydney property prices might not drop yet, as planning problems persist

by Mike Wood12 Jan 2022

The Sydney property market should be bracing for more affordability problems, despite the recent rise in listings that suggest an easing of the ongoing housing boom.

In contrast to the rest of the country, New South Wales has seen a significant fall in planning approvals, suggesting that the current underlying problems that have created a supply issue in the housing market in Sydney are likely to continue for the foreseeable future.

Planning had kicked up after the end of lockdowns – indeed, it continues to rise in every other part of Australia – but has fallen off a cliff in NSW.

“One thing we know is that you can’t build new apartments and housing unless you have planning approval to do so,” said Tom Forrest, CEO of Urban Taskforce, an industry body that represents property developers and monitors planning regulations.

“If you’ve got a drop off in planning approvals, it doesn’t mean that you’ll have a shortage in supply tomorrow, but what it does mean is that you will in a couple of years, when those approvals would have resulted in the building of new homes.”

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“This is in the context of immigration returning to Australia, which we all hope it will in the post-Covid environment, where there will be demand for more houses.

“The government in New South Wales has gone in the opposite direction to every other state in the Commonwealth. Every other state, in the second half of last year, saw more approvals, heralding more activity for jobs, construction and new homes.

“But not here in NSW: we actually went backwards, whereby the numbers went from 3,700 a month in September down to 1,900 in October and then 900 in November. That’s not supportable.”

Notably, NSW has undergone a change at the top in politics, with Gladys Berejiklian’s resignation and the brief suggestion of a leadership challenge by Rob Stokes, who was the planning minister under Berejiklian, before Dominic Perrottet became Premier in October.

How NSW’s government change affected planning and the Sydney property market

“There was a change in leadership in NSW,” explained Forrest. “Gladys Berejiklian resigned and there was a question over Rob Stokes and what role he had going forward.”

“There were also council elections, which is always a time for staff to down tools and contemplate a forthcoming Christmas.

“Maybe it was a combination of all those things. We saw in NSW a plummeting of planning work, and this particularly was the case with apartments. They have fallen off a cliff and we’re very concerned about that.

“We’re hopeful that with a new minister, Anthony Roberts, and a new secretary of the Department of Planning, Mick Cassel, that there will be a change in culture within the planning system.

“We’re hopeful that they’ll realise that the system is critical to economic growth and to housing supply, and that they’ll get on their bike and do more to facilitate planning approvals rather than marking, punishing and rejecting.”