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Sydney offers major development opportunity

The latest Australian Bureau of Statistics (ABS) data revealed that Sydney's total residential building approvals was down by 18 percent for the year to March 2009, compared to the 12 months prior.

In comparison, Melbourne's residential building approvals had dropped only 1.5 percent to 31,860, and is almost double the number of Sydney's at 14,683 building approvals.

Mathew Tiller, NSW Research Analyst at Colliers International, said there needs to be more incentive and less red tape in the development process for builders to re-enter into the Sydney market.

"These figures show a dramatic difference between Sydney and Melbourne's new housing markets and Sydney's developers will need more incentives to increase development activity."

Sydney's metropolitan population increased by only 1.3 percent to 4.4 million people during the 12 month period to June 2008, whereas Melbourne saw a 2 percent growth to 3.9 million – the highest level of growth compared to all of Australia's capital cities.

"Strong population growth and declining building approval numbers can only mean that Sydney will continue to experience strong rental growth and low levels of affordability, as the number of new residents entering the property market outstrips the number of dwellings needed to accommodate them," said Mr Tiller.