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Land owners near Sydney’s Badgerys Creek have cashed in on the NSW government’s decision in May to fund the Western Sydney airport, but experts say the days of mega windfalls are limited.
Vacant land values in Sydney’s outer west spiked by about 30 per cent in the 12 months leading to September, while non-vacant land is also growing at roughly the same rate, Cushman & Wakefield research shows.
But Tim Cassidy, Cushman & Wakefield’s director and NSW head of industrial, said that growth at that rate is “not sustainable”.
“It’s hard to believe that will continue for much longer; 30 per cent is phenomenal,” he said.
“Around the announcement of the airport, (there was) an initial very large uplift (in land values) and it’ll continue to grow and it’ll be significant, but not 30 per cent year-on-year, no way.”
Mr Cassidy added that the state government’s announcement that they would build the airport provided certainty to investors and developers that the plans were going ahead.
“Because the government announced they were actually going to do it, that’s why it jumped so heavily (but) I would say you’ll see that growth drop back significantly.”
While most purchases are of land that has already been rezoned for industrial use and ready to develop straight away, many investors were banking up land despite rezoning uncertainties.
“They speculate and buy this rural land in the hope that one day it’ll get rezoned (for industrial use) because the city’s encroaching towards the outer west,” Mr Cassidy said.
“They’re not paying industrial value for it, they’re paying rural value plus a bit, then when it gets rezoned, they’ll get the uplift; it is a gamble.”
Residential rezoning of industrial areas has also stimulated the south Sydney market, with residential developers buying up properties at rates of up to double the capital value of industrial stock in suburbs like Waterloo, Rosebery, Alexandria and Mascot.
“As those properties get sold to developers, we lose those buildings and they’re lost forever. It’s so close to the city so there’s no other land that can be rezoned to replace it,” Mr Cassidy said.
“That’s forcing prices for industrial land and buildings through the roof.”
It has also pushed new industrial supply out west, as well as further up vertically, with industrial complexes in south Sydney reaching up to three levels. But Mr Cassidy said the skyward growth won’t stop there.
“In Hong Kong and Singapore, they’re up to 10-15 storeys, they’ve got massive structures with massive driveways in circular motion but they can have very large trucks go up 15 levels.
“We’re fast approaching them; over time, you will see the multi-level (industrial buildings) increase and the levels increase, for sure.”
Although Alexandria has avoided its neighbours’ fate of morphing into an “apartment city” so far as it has not yet been rezoned for residential development, Mr Cassidy predicts parts of the suburb will be dedicated to housing.
“A lot of landowners in Alexandria are hoping that (it will be rezoned), because (residential) trumps commercial in value. If your site gets zoned commercial, it’s still not as high as residential.”