Crown Group chief executive bullish about prospects for Sydney apartment market

With demand for new Sydney apartments seemingly in free-fall in the wake of jitters over the banking royal commission, the Opal Tower cracks and another cladding fire, one developer is bucking the trend and actually raising his prices.

He is convinced that the series of strata scandals and continued lending restrictions will hit new and inexperienced developers hard but will actually increase home buyers’ appetite for product from better-established players in the market.

“The Opal issue and problems with cladding and credit restrictions don’t help the market, but they do help us,” says Iwan Sunito, chair and chief executive of developer Crown Group. “People are realising as a result that they need to buy from a developer with a long-term track record and a long-term interest in the industry.

“I know a lot of people who’ve bought recently from much lesser-known developers who are offering significant discounts on their apartments. But where I see a significant discount, I think they could also be buying significant problems.

“An established developer with a solid cash flow doesn’t need to discount – they can just hold onto their stock until later.”

The Sydney property market is already slumping, with dire warnings about property prices having another 10 per cent to fall, and demand for off-the-plan apartments tanking sharply.

This comes as the latest Domain data shows the median price of apartments generally across Sydney has already dropped from $745,400 in December 2017 to $702,000 in December 2018, a reduction of 5.8 per cent. Over the last quarter alone, it endured a fall of 3.3 per cent.

In addition, NSW apartment approvals have plummeted by 33 per cent over the past year on Australian Bureau of Statistics figures, and construction is down by 40 per cent on new buildings, according to JLL’s state residential apartment market report.

But Sunito, who’s completing and settling on $800 million-plus worth of stock this year, still views those factors as positives for a spring-clean of the industry.

He says restricted building approvals, limited land availability and tighter lending conditions for developers reducing supply versus strong market fundamentals in Australia with low inflation, low interest rates, high employment and plenty of wealth, make for an optimistic outlook.

“January has been very positive for us and we’re seeing buyers return to the market, with a surprisingly high number of inquiries,” says Sunito, whose group is currently selling apartments in Mastery in Waterloo, Arc in Kent Street and Eastlakes Live in Eastlakes, with two more projects to be launched this year in Melbourne and Brisbane.

“We build apartments in great projects in great locations and I think restricted supply will put upwards pressure on prices in 2019. Our stock is moving so we adjust the price accordingly.

“It’s interesting that people are prepared to pay more for quality product that they know will retain its value over time, but there’ll be a lot more pressure on one-off and desperate developers, and it will reduce the number of speculators in the market, which is a good thing.”

Chris Johnson, chief executive of developer lobby group Urban Taskforce, says he can understand Sunito’s confidence in an otherwise depressing market. “He’s carefully positioned himself with a following of loyal buyers and has kept his branding strong with projects by good architects and championing resort-style living,” Johnson says.

“Investors and owner-occupiers alike seem to be supporting him and in this market; it’s the developers who are delivering quality and something special that people seem to say they trust and want to go with. But it’s sad for the industry that the upcoming election, and the anti-developer rhetoric that’s going on, isn’t helping the market.”