By Alan Weiss, Sydney East Real Estate Agent
Sydney’s Eastern Suburbs are buzzing with talk about the luxury apartment market. Developers are eager to secure prime sites, and agents are making bold promises to owners. Yet beneath the excitement lies uncertainty: is this really the next big property wave, or a scramble by agents to lock in listings? Rose Bay remains one of Sydney’s crown jewels, with harbour views, leafy streets, and an unparalleled lifestyle—but the question looms: is the suburb at risk of an oversupply of luxury apartments?
Homeownership and Wealth in Australia
For decades, Australians have relied on residential property as their primary wealth-building tool. Today, the sector is valued at $11.6–$11.7 trillion, with outstanding mortgage debt around $2.4 trillion. This demonstrates the power of equity: families who purchased property 10, 20, or 30 years ago have often seen values multiply, creating intergenerational wealth that funds retirements, investments, and inheritances.
The Supply Challenge
NSW aims to deliver 377,000 new homes by 2029, supported by policies like Low & Mid-Rise Housing reforms (unlocking 112,000 homes) and Transport-Oriented Development hubs (231,000 homes), with over 70,000 already under construction. But the Eastern Suburbs are different. With limited road infrastructure, high land costs ($10,000–$15,000 per sqm), and community resistance to density, there is a real question: can government targets realistically be met without straining local streets and services?
Affordability and Borrowing Limits
Most Australians would struggle to qualify for million-dollar loans under current lending conditions. Banks assess borrowers at serviceability rates of 9–9.5%, meaning:
- $1 million loan: $8,000–$8,500/month → gross income ~$320k–$360k
- $2 million loan: $16,000–$17,000/month → gross income ~$640k–$720k
- $3 million loan: $24,000–$25,500/month → gross income ~$960k–$1.1 million
With average full-time salaries around $97,500 and household incomes near $121,000, these loans are accessible only to the top income brackets. Multi-million-dollar apartments appeal to a very limited buyer pool.
The Downsizer Dilemma
Downsizers face significant challenges. Moving to smaller apartments, paying high stamp duty (over $338,000 on a $6.5 million property), and adjusting to reduced living space is not easy. Most new developments are six to eight storeys with 60+ units, far from the boutique, low-rise lifestyle many downsizers imagined. There is also uncertainty about resale: who will buy their family home in a few years if many downsizers are selling simultaneously?
Streetscape and Infrastructure Pressure
Historically, Woollahra Council has capped development at 2–3 storeys, with occasional 4–5 storey buildings in commercial areas. State-led density pushes are now allowing 6–8 storey buildings along key roads like Dover Road, Newcastle Street, and Old South Head Road. For residents, traffic congestion is already intense, and as development ramps up, commuting and school runs are likely to become even more stressful.
The Economics of Luxury
Land in Rose Bay exceeds $15,000 per sqm, with construction costs of $12,000–$15,000 per sqm. Developers must price apartments at $50,000–$60,000 per sqm to make projects viable:
- 2-bedroom (~80 sqm) → $4–4.8 million
- 3-bedroom (~140–160 sqm) → $7–9.6 million
The pool of buyers for $4–10 million apartments is small. Competition from nearby hubs like Bondi Junction, Edgecliff, and Bellevue Hill adds pressure, creating the risk of oversupply. Many projects rely on pre-sales for funding, and high construction and holding costs mean developers carry significant financial risk. Already, I see sales moving back toward the 1980s model, where it could take two years or more to sell units.
Key Takeaways
Rose Bay will always be exceptional, but the combination of government housing targets, high construction costs, and limited buyer pools requires caution. Traffic, infrastructure constraints, and high prices risk undermining the very lifestyle that makes the suburb unique. For homeowners, buyers, and investors, informed guidance is more critical than ever.
