Sydney’s flourishing apartment market has received plenty of attention of late, much of which would not be classed as positive as reports of oversupply, price falls and lending restrictions become increasingly common.

But in spite of those issues, one pro-development lobby group has called for work to start on more apartments in the city, claiming they are needed to address an undersupply of new homes.

While new home commencements in Australia reached a record mark in 2015, with work starting on more than 220,000 dwellings, lobby group Urban Taskforce claims Sydney has missed out on thousands of new homes the city needs and believes the apartment sector still has a role to play in fulfilling that demand.

“The NSW Department of Planning says that 33,200 new homes are needed each year for 20 years in Sydney but last financial year only 27,348 new homes were completed. With a shortfall of nearly 6,000 new homes during the boom times it is essential that more homes are built across Sydney,” Urban Taskforce chief executive officer Chris Johnson said.

“Our members believe the market is still strong for new apartments in key parts of Sydney where cosmopolitan living is becoming the norm. They are concerned however that the market could be destabilised by a series of negative actions that combine to lower confidence in the industry,” Johnson said.

Rich Harvey, chief executive officer of, agreed with Johnson that Sydney likely has an undersupply of new homes and also said some concerns about the city and its apartment market may be somewhat overstated.

“Traditionally Sydney has been quite undersupplied and the most undersupplied of all the capital cities around Australia and it looks like there will continue to be pressure on the supply side,” Harvey said.

“What we’re seeing is that there’s a very strong pipeline of supply coming and I don’t think we’re going to have any major problems with supply in Sydney. I definitely think there’s a bit of fear mongering going on and that’s around the APRA and RBA discussion about the potential for oversupply,” he said.

Harvey doesn’t completely discount the issue of apartment oversupply, but he believes concerns that apply to certain suburbs have been extrapolated to cover the entire Sydney market.

“I do believe there will be pockets of oversupply and that’s where the investors need to be careful and do a lot of research to identify the areas where there is the potential for a lot of supply,” he said.

“[People] paint Sydney with the same brush. They think ‘oh gosh, there are so many cranes in the air’.

“For the average property observer out there, you’ve got to drill down and look at the numbers at a suburb by suburb level.”

Harvey said suburbs such as Green Square and Parramatta are examples of where oversupply might be an issue, but Todd Hunter, founder of wHeregroup, believes the issue may be spreading and that demand for apartments is falling.

“A lot of the concerns have been centred in that Zetland and Green Square area, but areas like Hurstville are starting to see number of new apartment projects pop up,” Hunter said.

“I don’t agree that there’s a need for more apartments in Sydney. We’re already seeing prices drop and demand drop. Banks are stopping lending for them, either by suburb or by dwelling type and they’re doing that for a reason,” he said.

Hunter also said any issue of an undersupply of available homes is likely made worse by apartments being left vacant by foreign owners.

“I think we’ve got a glut of supply at the moment, but a lot of it is being left unoccupied.

“It’s stuff that’s been bought by foreign buyers and they might visit and use it once a year or it’s used for part of the year by their children who are at university.”