Marcus Tole
Commercial Property Analyst
Christian Finianos
Commercial Property Researcher
As Sydney’s housing market grapples with delivery shortfalls and cost pressures, a key question is resurfacing among investors and developers: is it more strategic to build new, or to buy established unit blocks?
Across Western Sydney — where population growth continues to outpace supply — many are finding that the numbers now favour buying. Elevated construction costs, developer taxes, and planning delays are reshaping feasibility models and prompting a rethink of what “value” really looks like in today’s market.
The Market Backdrop: A Supply Crunch Meets Cost Pressure
According to RWC Western Sydney’s Residential Development Overview (Issue 6, Sep 2025), the region continues to anchor NSW’s housing growth, capturing 59.8% of all new dwelling approvals. Yet only 5,369 units are currently under construction, compared to an annual requirement of 25,636 dwellings.
Despite slight moderation in material prices (up just 1.6% annually), input costs remain elevated and labour shortages persist, keeping project viability under strain. Added to this, the AFR reports that developer taxes and infrastructure levies have surpassed $100,000 per unit in some Western Sydney LGAs — a burden that is increasingly pricing out smaller developers and forcing larger ones to pause new builds altogether.
As Andrew Sacco, Sales Executive at RWC Western Sydney, explains: “We’re seeing many developers reassess. Projects that looked feasible 12 months ago now need full repricing because of new contributions, longer approval timeframes, and ongoing trade shortages. Unless you’re exceptionally well-capitalised, the path to delivery is becoming narrower.”
Source: realestate.com.au
Buying Established Unit Blocks: Value Below Replacement Cost
For investors seeking to enter or expand in the multifamily market, existing unit blocks are emerging as some of the best-value assets available. Many are trading below replacement cost, offering investors the opportunity to acquire established income-producing stock for less than what it would cost to build today.
“Buying a completed block provides clarity, you know your yield, your occupancy, and your upside,” says Joseph Assaf, Director at RWC Western Sydney. “In many cases, investors are paying 15–20% below replacement cost for quality, income-generating assets. It’s a rare situation where standing stock is cheaper than construction.”
With vacancy rates sitting below 5% across Greater Sydney and sustained population growth of 59,000 new residents annually, demand for rental housing remains deeply entrenched. For income-driven investors, that means strong tenant retention and consistent yield performance.
Buying also provides a pathway for value-add strategies — such as renovations, strata subdivision, or long-term redevelopment under NSW’s Transport Oriented Development (TOD) reforms. This hybrid approach allows investors to capture both short-term rental income and long-term capital growth potential as zoning frameworks evolve.
Building New: Control Comes at a Cost
For developers, there’s still upside in new construction, but only under the right circumstances. Recent interest rate cuts to around 3.6% have improved lending conditions, and there’s no shortage of demand for new, high-quality apartments.
However, the economics remain tight. Even with material cost moderation, labour shortages and contribution fees continue to undermine feasibility. The AFR’s findings, that development taxes alone can add over $100,000 per apartment, highlight why many private developers are stepping back or scaling down their projects.
As Andrew Sacco adds: “We’ll always need new housing, but right now, the imbalance between costs and achievable sales prices makes it difficult for smaller projects to stack up. It’s why we’re seeing many investors pivot to acquisition strategies instead.”
That pivot is also supported by planning inertia, while more than 80,000 dwellings are in various planning stages across Western Sydney, the pipeline-to-delivery conversion rate remains exceptionally low.
Why Buying Currently Wins
RWC Western Sydney believes that in the current environment, investing in completed unit blocks represents a stronger and safer play than taking on new construction risk.
- Immediate income: Established blocks deliver rental yield from day one, with minimal exposure to cost overruns or delays.
- Below replacement cost: Many properties can be acquired for less than current build prices — a rare arbitrage opportunity.
- Repositioning upside: Cosmetic upgrades, re-leasing, or long-term redevelopment all provide additional growth potential.
- Demand certainty: Western Sydney’s structural undersupply ensures strong occupancy and rent performance well into 2026.
“From a timing perspective, the numbers just make sense,” says Joseph Assaf. “You can’t replicate some of these existing assets for what they’re trading at. Until construction costs and levies come back to balance, buying existing stock is the more rational move.”
Final Thoughts
Western Sydney’s housing dynamics are clear: record population growth, deep rental demand, and a construction pipeline struggling to keep pace. While building new product offers control and long-term potential, the immediate value lies in existing, income-generating assets that are trading below replacement cost.
At Ray White Commercial Western Sydney, the team firmly believes that investment outweighs development in the current cycle, with buying established unit blocks offering the best balance of yield, value, and future optionality.
For more information or to discuss current opportunities, please feel free to reach out to the team at RWC Western Sydney.