Hence the large number of 2012 and 2013 articles which argued that in spite of falling interest rates Sydney prices couldn't increase in this cycle since prices were already too high...and that, it seemed, was that.
Also in the simplest terms, developers needed prices to go up to justify building more stock, and while prices remained flat the dwelling shortage became more and more acute.
This is precisely why we confidently predicted the surge in prices.
Today, let's take a more in-depth look at the levels of supply due to come online and where it will be located.
Australia's population is very heavily urbanised, with close to 40% of the population living in Sydney and Melbourne.
Meanwhile, the the population of Sydney, depending on where you draw the boundaries, is around 4.6 million, and is growing at about 1.6% or 63,700 persons per annum as neatly charted in this Matusik Missive.
Demand: Sydney persons per household
After a century of declines, the number of people per household is now expected to stop falling.
Previous projections in 2008 saw the Sydney household size forecast to drop from 2.61 people per dwelling to 2.51 by 2031 (already well above the 2005 projections of 2.36 people per house by 2031).
Based on recent indicators it seems to be a fair assumption that the number of persons per dwelling will stop or already has stopped falling, in part due to affordability constraints in the harbour city.
If we take a figure of 2.6 persons per dwelling this implies that NSW needs around 40,000 dwellings per annum to house the expansion of the population and Sydney around 25,000 dwellings per annum.
When further allowances are made for obsolete stock and the need to address the currently existing ugly supply/demand imbalance which I discussed in detail here, then it can be said that the city would want to see significantly higher completions in order to take the pressure of dwelling prices.
Previous estimations have ranged from around a required 27,500 dwellings per annum for Sydney through to 2031 up to 30,000 per annum. Given the chronic shortage of stock on the market, clearly the latter number would be far more effective in addressing the imbalance.
The rise of apartment stock
It is to be expected, with a rapidly growing city population in a constrained area such as Sydney, that more than ever before, the new dwellings will be of the apartment and medium-density type.
The most recent data from the ABS showed 17,500 dwellings approved in the month for the whole of Australia, split between private sector houses (about 95,00) and other dwellings (about 7,800).
This is welcome news for the economy, and represents a huge annual uplift for private sectors houses (+26.4% y/y) and for other dwellings +46.3% y/y).
Stand by for a flood of media articles on this topic.