Can extra laws actually improve Sydney property market?

SCB Legal |

2 June, 2018

Table of Contents

The Sydney property market and specifically as it relates to Australians purchasing a home, is in crisis. The recent Australian Bureau of Statistics findings have been widely reported. In 2017, Sydney’s staggering population growth resulted in 123,000 moving into the city. A lack of available housing continues to drive demand, which in turn causes prices to increase.

Some were hopeful that a slight downturn in the market earlier in the year would make purchasing a property easier. However, peak migration numbers have been cited as the source of a possible price growth by the end of the year.

The median house price in Sydney is already more than $1 million and Sydney housing ranked the world’s second most unaffordable.

How this affects Sydney is a topic of much discussion. Many negative consequences have been reported and these include:

  • inflated property prices
  • incomes being far less than what rental and purchasing prices dictate
  • rising uncertainty
  • increased homelessness
  • young Australians being unable to save enough to purchase a home
  • people being forced to live in overcrowded suburbs and the many problems borne out of such living circumstances
  • increased traffic and congestion
  • abuse of the residential tenancy act, resulting in far more than the legal amount of tenants residing in apartments

Given the property climate, it’s easy to understand why vertical living became something of a necessity. According to ABS statistics, nearly half of the occupied apartments in Australia are in NSW.

One of the questions frequently raised is what the NSW government is doing to improve the Sydney property market?

NSW Government Initiatives To Overcome Sydney’s Supply & Affordability Problem

1. Density Bonus Aimed At Building More Affordable Housing

In 2009, the NSW government introduced the density bonus as a way of encouraging developers to build more affordable housing. However, it has been argued that developers have merely taken advantage of the planning policy. In addition, the incentive offered developers increased floorspace in return for affordable rental housing.

The incentive scheme delivered a mere 1,287 affordable units in Sydney from 2009 to 2017. This number equates to between 0.5% and 1% of the total supply in Sydney. Figures like these indicate that it’s done little to positively impact the housing affordability problem.

2. Residential Flat Development/State Environmental Planning Policy #65

An initiative introduced by the former premier Bob Carr, called for improvements in the design quality of apartment developments. Due to the affordability problem and the fact that more people were living in apartments, it became necessary to create a specific policy.

The residential flat development (SEPP 65) (now renamed State Environmental Planning Policy No.65 – Design Quality of Residential Apartment Developmentand Design quality program (DQP) were introduced in the early 2000’s in order to improve the design quality of residential apartment developments. One of the stipulations was that only qualified architects could design residential flat buildings. Interestingly, the Building Designers Association saw this as a restriction of trade.

The Apartment Design Guide replaced the former Residential Flat Design Code that was intended to enhance the supply and affordability of housing.

Matthew Pullinger, former President of the Australian Institute of Architects NSW stated, that this represented one of the more successful NSW planning commission’s legislation. However, the consensus was that issues existed with its implementation due to it not being applied universally and some of the language being ambiguous.

3. Stricter Lending Policies

More recently, stricter lending policies were introduced to reduce property prices. While they may have to a slight extent, in doing so, stricter policies make it more difficult for Australians wanting to purchase a home. Sean Fenton, director of Tribeca Investment Partners stated that a “tightening of lending standards directly impacts the ability of the marginal buyer to buy a house.”

Corelogic revealed the devastating statistics that a 20 per cent deposit, required for a common Sydney home required 167 per cent of the average household’s annual income.

4. Zoning Laws Restricting Supply Of Land

Zoning laws were implemented with government regulations restricting the supply of land for property aimed at reducing housing prices.

5. NSW Voluntary Planning Agreements

The NSW voluntary planning approach comprising agreements with developers was aimed at reducing the affordability crisis. However, it’s been heavily criticised by experts in the field, most notably University of Sydney’s Professor Nicole Gurran.

Professor Gurran conducted a study which revealed that voluntary incentives do not result in a lot of affordable housing. She recommended changes saying that the “planning system should better support affordable and social housing development by reducing land costs and ensuring that affordable homes are well located near jobs and services.”

Despite the NSW laws that have been introduced, Sydney’s property market remains expensive and its landscape overcrowded.

Characteristics of Sydney property market

High-density living has become synonymous with Sydney’s residential property market. The Sydney Morning Herald stated that “Sydney’s traditional stand-alone homes will be outnumbered by apartments within 7 years”. Last year’s census revealed that there are more than 100 suburbs where 50% of the population or more lives in an apartment.

How does Sydney’s high-density living affect residents?

The effects of overcrowding and having more and more people live within close proximity to each other presents a myriad of problems.

Even 4 years ago, consequences associated with Sydney’s high density living were highlighted. A number of health risks were cited that are linked to over populated living. In 2014, Dr Resci stated that both, “mental and physical health is affected”.   

Many have researched the effect of high-density living on low-income communities, revealing that people are being displaced and many forced into other suburbs. Stimulation of development proposals has resulted in many people suffering when low cost housing is redeveloped into soaring apartment blocks. Development and redevelopment has led to residents no longer being able to afford the suburb’s hefty price surge.

Some might argue that recent laws are actually worsening the problem by further contributing to the already congested Sydney landscape.

Experts explain how NSW law should better manage Sydney

Dick Smith weighed in on the Sydney housing crisis, urging the government to implement a range of initiatives. He attacked Australian politicians in his book claiming that they’re too scared to execute the necessary tax changes. In his opinion, such initiatives would help curtail the current situation in the Sydney housing market.

In highly controversial statements, he argued that it was Australia’s immigration policies that were responsible for the increase in house prices, reflecting 12 times the average annual income.

Many have argued that the federal government needs to reduce immigration and implement changes to tax breaks. These include those relating to capital gains laws and negative gearing.

Whether or not you agree with Smith’s political viewpoints, the fact remains that the exponential increase in property prices is why developers and investors continue to reap the benefits. Turning parcels of land into large apartment buildings is still continuing and it doesn’t seem like the issue is being addressed.

Demand is always going to dictate the market. Could Sydney’s overpopulation be curtailed if there wasn’t such an urgent need to create a more affordable alternative to house dwellings? Is increased vertical living and the apartment building saturation a reflection of insufficient parcels of land on which to build or is this price driven?

Some might argue that it is a combination of both. Regardless of the underlying reason, this environment has most definitely established Sydney as a densely populated area.

Sydney’s high density living solutions

Maybe our politicians need to listen to our Australian youth who are heavily invested in the discussion. One such 1st year architecture student, Caleb Niethe proposed a design that would improve high-density living and address Sydney’s housing crisis.

His innovative “Bookshelf” design aims to improve the lives of residents by addressing not just housing but also incorporating transportation needs, the environment and energy consumption.


Many of us may be wondering why laws aren’t being introduced to limit certain developments? At the very least, by imposing restrictions on developers. It’s a fair point to argue that this situation could be improved if the legal system was more actively involved in the discussion.

For example, an investor purchasing a rundown house situated on a large parcel of land in Sydney’s eastern suburbs will find it rather easy to turn that piece of land into an apartment building with 12 apartments. No laws exist that prevent overcrowding from continuing or accelerating.

If a law was introduced stating that certain suburbs were deemed as having reached capacity, developers and investors would be prohibited from further contributing to the problem. Lawmakers could then evaluate suburbs based on a set of criteria. This could include an analysis of the number of people living in that area, the amount of apartments in relation to traditional houses, transportation and a range of other factors. 

Does this seem like a better solution for both the affordability crisis and overcrowding in Sydney?

We value our readers’ opinions and invite you to voice yours by sharing in this important discussion.

What laws do you think the government should introduce to help ensure affordable housing? How can the law effectively limit high-density living that Sydney residents have come to expect?

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