On the ground
I recently took a look here at the statistics relating to the record number of dwellings under construction in Australia.
There's almost nothing worse than bloggers sitting at their desks churning out charts and statistics and claiming some level of pseudo-expertise, true enough.
You've got to be active markets to truly get any understanding of them, and at the very least get out there and see some of what's happening for yourself.
And I have to admit that when it comes to Sydney property, I rarely travel too far west of Balmain unless I absolutely have to.
Thus it was with a slightly heavy heart last week that I took a leisurely drive around Sydney's apartment construction hotspots and urban activation precincts, in the north, south, east, and west of the city.
Apartments super-boom
What a change in the last four years there has been! It's amazing what rising prices can do - from half a decade of under-building to apartment sites being developed in almost every spare corner of Sydney.
The inner south is one of the most active sub-regions in terms of actual volume of construction.
In 2013, the stated plan was the inner south would deliver around 25,000 new apartments across Mascot, Zetland, Green Square, and other nearby suburbs, and much of this construction has been completed or is underway.
Despite the huge absolute number of apartments, in my best assessment this is not Sydney's highest risk area in this construction cycle.
The bulk of the new construction is located only 4 to 8 kilometres from the heart of the city, with direct city train links granting accessibility.
Moreover, despite these being high density suburbs, many of the new developments are pleasingly mixed use in nature, with commercial facilities blended in. As such, there is typically access to everything from cafes and restaurants, to hardware stores, supermarkets, doctor and dental services, all within easy walking distance.
Yes, there are flight paths - as indeed there usually are around airports! - but then much of Sydney's inner west deals with flight paths too, and this has not restricted demand for housing one iota through this cycle.
West is not best
Despite some years spent in northern Australia and East Timor, I've lived for about 10 of the last 18 years full time in Sydney, so I'm well familiar with the problem traffic congestion. But since I rarely travel west of Balmain, so what would I know, really?
Well, strewth. Here's a top tip for you - don't plan to drive down Parramatta Road on a Friday after midday. The traffic is just shockingly, dreadfully bad, and even worse than even I can ever remember seeing before: lane after lane of traffic standing chock-a-block for just as the eye can see.
Sure, there is a new $15 billion road link under construction - the 33km long WestConnex, which will ultimately link the M4 and M5 - but this appears to be a classic case of lagging or reactive planning, rather than proactive infrastructure development.
When you finally get there central Parramatta is quite a sight (or should one say, "site") to behold right now, with masses of apartment development coming on-stream. And some of the largest projects are yet to come, including the giant Aspire tower, which will eventually add a further 700 apartments.
How well will Parramatta absorb the new apartments? I guess ultimately the answer to this question will come down to job creation. But in the short term at least, I'm sceptical.
Western Sydney has an existing jobs deficit, with more jobs migrating to the city, and the City of Sydney plan targeting more a greater commercial draw for the main Central Business District.
At least one positive thing that can be said about Parramatta is that developments have sometime been mixed use, incorporating commercial, retail, and residential space.
Traffic trap
Unfortunately the same cannot always be said about Homebush, Olympic Park, and the masses of arguably ill-planned development down at the human/traffic trap that is Wentworth Point (formerly a part of the suburb of Homebush, located on the Parramatta River).
As Wentworth Point is still largely under construction, some of the streets feel spookily like a ghost town, even on a Friday afternoon.
Nevertheless, the volume of new units constructed and under construction was quite a shock - like a miniature Singapore sprouting up on the water. It's very hard to deduce how many of these units are tenanted from street level, but in my best estimate, many of them appear to be vacant.
I understand that in addition to a couple of dozen high-rise apartment towers a school, plaza, shopping precinct, and usable green space are planned for the area, with an astonishing 20,000 residents expected to live in Wentworth Point over the next decade and a half.
All I can say is, the planned infrastructure will be sorely needed - having driven around the sparse road system the tenants will never be able to get out of the joint! Connex alone can't fix this. More regular train and bus services out of Olympic Park would be a welcome start, while improved access to Rhodes train station will also help.
Inner suburbs outperforming
Building approvals data through this cycle has generally suggested that unlike in some other cities, the inner suburbs are not being so well supplied. Indeed, the recent draft City of Sydney plan made it a stated goal to restrict residential development in favour of productive commercial space.
As a general rule, many of Sydney's inner suburbs have somewhat more constrained supply, and far superior access the city.
Residents of the eastern suburbs and the lower north shore have access to world class beaches, and perhaps more importantly, they don't have to contend with the horror of Parramatta Road.
Supply and prices
It's long been my contention that the end game for Sydney's high population growth is a two-speed apartment market, such as we have seen in more developed cities such as London. Prime central suburbs with outstanding transport links will generally see dwelling prices outperform over time.
This appears to have been borne out in price action over the past year to some extent.
In this Domain article, Chief Economist Dr. Wilson goes so far as to describe the apartment oversupply as a myth, while noting that median price growth in a number of lower north shore, inner west, and eastern suburbs has been relentlessly strong. And so it has.
Chinese investors
Will Sydney end up with an oversupply of apartments through this cycle? The answer, as with so many questions relating to the Australian economy, probably lies with China.
The latest figures from the Foreign Investment Review Board (which I looked at in more detail here) showed that Chinese approved investment in Australian real estate all but doubled to $25 billion in financial year 2015.
And most foreign investment in residential property ends up hitting Melbourne and Sydney.
With a huge increase in foreign investment demand for new and off-the-plan dwellings, the key question is what percentage of these purchases never make it to the rental market?
After all, a record construction boom won't make a jot of difference if Chinese investors are leaving their apartments vacant.