Melbourne’s apartment market, oversupplied or not?
After years of being told that Melbourne is on the verge of an apartment glut, data released by BIS Oxford Economics has thrown that idea on its head.
While BIS itself has previously forecasted that Victoria would have an excess of 20,000 apartments by 2018, it has recently revised that figure to just 2000.
The reason for the change in outlook is Melbourne’s surging population, which has grown by roughly 100,000 people a year for the last four years.
The surge in population growth has also led Commonwealth Bank economist Michael Workman to state that “much-debated oversupply” of units in the city was “marginal,” as rents were still increasing.
Similarly, CoreLogic state director for Victoria Geoff White said that while a steady supply of units were still coming on to the Melbourne market, they were being absorbed by the city’s strong migration and population growth.
Significantly, Melbourne is now one of the 10 fastest growing large cities in the developed world, growing quicker than Vancouver, Mexico City, London and New York.
The boom in Melbourne’s population has been regularly cited by the Urban Development Institute of Australia as the number one reason why the news of an apartment oversupply has been overblown.
In a piece published on the Urban Developer website, UDIA Victoria’s CEO Danni Addison had this to say about Melbourne’s population growth and apartment market.
‘Melbourne will experience approximately the same volume of growth that occurred over the last 85 years, in the next 35. ‘We have an increasing number of people to accommodate over the next 30-40 years at least, and that’s where Melbourne’s apartment market will come to fruition.’
While the apartment boom of 2015 and 2016 saw many cranes on Melbourne’s skyline, Addison believes future supply is still a major concern.
“The forward pipeline for the years to come tells a very different story, and the Residential Development Index points to a serious housing undersupply. This is cause for major concern both from an affordability, liveability and economic perspective as Victoria’s population only looks [to] increase on recent projections.”
Increased taxes levied against foreign investors combined with local investors leaving the market as a result of stamp duty changes means the amount of development in Melbourne may very well struggle to keep up with demand. This is a scenario that will only see prices rise further, meaning now is great time to enter Melbourne’s apartment market.
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