Breaking Delivery Crisis Chokehold on NSW’s Biggest Housing Market

Western Sydney is shouldering the future of New South Wales’ population growth but housing delivery is failing to keep pace. RWC Western Sydney’s latest Residential Development Report finds the region needs 24,000 new homes a year until 2041 to accommodate more than 56 per cent of the state’s projected population growth. But with just 5404 homes under construction, supply is falling well short, meeting less than a quarter of what’s required. “This is not a planning problem,” RWC Western Sydney managing director Peter Vines says. “It’s a delivery crisis.” The data is confronting, and the forces behind Western Sydney’s supply gap—feasibility, labour shortages, investor risk and policy gridlock—dominated conversation at The Urban Developer Greater Sydney Residential Summit this month. The approvals are there; the action isn’t According to the RWC report, more than 35,000 homes across Western Sydney have development approval but remain unbuilt, stalled by cost, capacity or market conditions. In the South West Growth Area, its fastest-growing precinct, just 58 homes are under construction. ▲ Charter Keck Cramer national research lead Richard Temlett addresses The Urban Developer Greater Sydney Residential Summit. “Pre-pandemic, we weren’t building enough dwellings across Australia,” Charter Keck Cramer’s national director of research Richard Temlett told the summit. “We have one to two market cycles before we can possibly get back into balance with the supply of dwellings.” He notes the mismatch is most acute in the west, where population growth is outpacing housing delivery by nearly four to one. “You can have the best planning system in the world,” says Temlett. “[But] if these projects are not financially viable, or there’s not a certainty to proceed, they’re not going to proceed.” Temlett says the price gap between new and established housing is one of the biggest barriers to getting projects off the ground. “The delivery of new stock is actually not financially viable because they have to come in at a much greater price point than the established market.” His team regularly models delivery costs against market prices, and in many areas, the numbers “can’t stack up”. But he sees potential for progress. “I feel now the politicians … are going to start listening,” he says. “I think they’re absolutely nuts if they don’t, because the millennial base that is being locked out of the housing market is extremely angry.” Feasibility remains fragile Cost pressures may have eased from the 2022 peak, but feasibilities across much of Sydney’s outer rim remain weak, according to Mitchell Brandtman partner Tass Assarapin. “There’s still issues where some construction costs are going to cost higher than the sale costs in the outer ring of some areas in Sydney,” he told the summit. “Which is still raising some red flags.” He says delays and unrealistic construction schedules are compounding the problem. “The number one reason above and beyond is the program is undercooked,” he says. “The builder and the developer are all pushing for a very unrealistic program completion date. “There’s always an additional prelim cost and labour cost that’s getting added into the builder’s cost because projects are just dragging on and on and on.” Smaller-scale projects are proving more viable. “The ones that we’re seeing really stack up the most at the moment are probably your smaller developments,” he says. “And when I say small, I’m talking duplexes, townhouse developments.” He also warns against chasing lowest tenders. “Even last week we had this discussion with a developer and lo and behold they’ve just engaged the lowest tender, which is well below our estimate,” he says. “They’re thinking that’s fine, we’re happy to take that punt on, and that’s their prerogative … but I wouldn’t recommend that approach at all.” ▲ Sammut Group chief executive Allen Sammut speaks during the Apartments in Focus: Is Greater Sydney on the Cusp of a Residential Supercycle? panel. Rezoning lifts expectations but not viability Sammut Group chief executive Allen Sammut says landowners are inflating their expectations in response to planning changes. “The landowners already know the value’s there,” he says. “So even before a shovel’s in the ground, they’re pricing that into the deal.” Abadeen executive chairman Justin Brown says mid-market buyers are the most constrained. “At the top end, we’ve had that flex to deal with construction costs,” he says. “But in the middle market, a $750,000 buyer can’t just stretch to $810,000. The numbers don’t work.” Buyers are circling but the product’s not there Demand isn’t the problem, according to Domain chief of research and economics Nicola Powell. She says buyer intent remains strong, particularly among millennials, downsizers and Gen Z, with preferences increasingly shaped by affordability, lifestyle and accessibility. “We have a large millennial cohort hitting family formation age, those late 30s, early 40s,” Powell says. “And they are trading the CBD cafe culture to school catchment zones in those outer suburbs. “In these corridors, buyers are already searching $100,000 to $150,000 above the current stock that is available today.” ▲ Domain chief of research and economics Nicola Powell presenting key buyer insights at the summit. This trend is most pronounced across Sydney’s west and south-west, particularly in areas such as Canterbury, Mount Druitt and Campbelltown. “There is a mismatch in product offering in that inner south-west,” she says. “Auburn and Bankstown buyers are searching anywhere between $70,000 to $100,000 above what those current listing prices are.” Powell says this points to clear gaps between what’s being delivered and what buyers want, particularly in the apartment and townhouse segments. According to JLL national head of residential project sales Freya Watson, mistrust—especially around off-the-plan sales—is a key barrier the industry must address. “I think it’s really important that we educate buyers about why apartment living is the future,” Watson says. “We won’t solve the high housing crisis if we don’t encourage people into apartment living. “And there is a lot of mistrust in the industry ... and not really understanding off-the-plan sales. “We have to do more to educate buyers as to why buying an apartment off-the-plan is a good opportunity ... it helps to alleviate some people’s concerns.” ▲ JLL’s Freya Watson discusses the need to rebuild trust in off-the-plan housing amid buyer hesitation. A shift in thinking A recurring theme across the summit was the need for structural reform, not just incentives. Former Mulpha head of development Tim Spencer says the productivity crisis in construction is increasing risk for developers. “For me, it’s just outselling productivity as a nation and especially in the construction industry,” he says. “It’s an absolute debacle and if government can play a part in helping there, I think that could make the biggest difference. “You can give me a 30, 40, 50 storey tower but you’re just really extending that delivery and that exposure to the risk through the builder. “We’re still going to see builders go under, I think, in the next couple of years. “I think the sophisticated developer that has the power and the intel to engage in a partnership model with the builder, that has to be successful.” Shifting cycle: Can Western Sydney catch up? Falling interest rates, stabilising costs and investor interest are fuelling cautious optimism but the delivery gap remains the major hurdle. “Sydney has its work cut out more than Brisbane or Melbourne,” Temlett says. “We rely more heavily on apartments, and those are the hardest to deliver right now.” For Vines, the message is simple. “We’re entering a phase where market demand, government policy and demographic growth are finally aligned,” he says. “But without targeted intervention, capital won’t find suitable supply. And Western Sydney can’t afford to wait.”

Breaking Delivery Crisis Chokehold on NSW’s Biggest Housing Market

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