Some sobering quotes:
“In Sydney, apartments are becoming more expensive because of the escalation in site costs described above. In Melbourne, price is not such an issue. But the transformation of the cheaper apartment precincts into dense enclaves of mobile tenants,…most certainly is. So too is the physical oppressiveness of these precincts as new developments create wall to wall blocks sheer to the footpath. In addition these precincts are largely devoid of community facilities and open space. This makes it all the more likely that Maureen McInroy’s prediction that they will be regarded as slums will come to pass. Who will want to buy such apartments?…”
“While we don’t want to put a date on it, the fact is that thousands of off-the-plan investors will soon be confronted with a market replete with surplus apartments. This will first become obvious in Melbourne. When it does, it will create a wave of uncertainty that will ripple across the residential property industry…We will not have to wait until 2022 before a glut of apartments becomes obvious. It is already looming over Sydney and Melbourne. As noted in Table 3, completions are about to jump to around 21,000 to 22,000 in both 2016 and 2017 in Sydney and Melbourne, from 13,000 to 14,000 in both cities in 2014 and 2015…The current huge production of apartments is occurring at a time when the need is limited. This is because there will be little growth in the number of young adult Australian residents over the next decade. They are the main source of demand for apartment rentals while singles and couples. Their stay in apartments is temporary because the vast majority move to family friendly housing when starting a family. When they leave they vacate space for the next cohort. Most of the projected expansion in the need for apartments will come from of overseas migrants, especially those on temporary visas. However, as noted, the stock of these migrants is not expanding nearly as fast as was the case in the past decade.”
More article links and quotes:
“It seems every research entity relevant to Melbourne real estate has joined me in warning about the overbuilding of inner-city units. But new projects keep on coming.
The latest mega project is an application for six towers in Fishermans Bend, with 1,580 units in a $600 million development south of the West Gate Freeway. Meanwhile, a 600-unit project has been proposed for South Kingsville and VCAT has approved a 450-unit project at South Yarra. Melbourne may be the population growth capital (Melbourne added 95,600 to its population in 2014, compared to Sydney’s 84,200) but there are limits to how many units are needed – and to how many can be flogged to Asian investors.
For all the above reasons, Melbourne inner-city apartments are shaping as very bad investments”
“current urban policy is based on “a flawed evidence base” that will result in a continuing scarcity of affordable family-friendly housing in both cities, and a “serious glut” of high-rise apartments.”
“By June next year, the country is likely to have more than 74,000 apartment completions, which is 5000 more apartments than it needs. In Melbourne, which faces a surplus of 15,000 apartments, prices are likely to fall 10 per cent over the next three years, BIS Shrapnel says.”