According to the Australian Bureau of Statistics, Melbourne apartment approvals were approximately 23,000 this past financial year, 75 per cent above the long term average of 13,000 a year. Nearly half of those were in the central business district and inner-city markets such as South Yarra and Southbank.
BIS Shrapnel (known for its analysis and forecasts of the construction industry) forecast that Melbourne would be oversupplied with apartments later this financial year.
What Our Buyer’s Advocates Have To Say
In a selling market the rule of supply and demand must be respected. An oversupply of a specific type of stock will negatively affect sale values and rental returns for owners. For a property investor, a major concern would be a rise in interest rates and how this would impact property values when a large volume of stock enters the market.
Why so many approvals?
According to the planning minister Matthew Guy: “Building more apartments in the city takes population pressure off quieter suburban areas,” he said. Mr Guy told the lawyers’ meeting ‘We are going through the greatest level of building, of interest, of growth in our city since the gold rush.”
More info on approved developments: The Age
Australia’s largest residential high rise tower has been approved by Planning Minister Matthew Guy
Doom & Gloom reading: A great article from the AFR: Off the plan value plunge. Highlights:
“Nearly 44 per cent of apartment purchases in the most populous cities are below the sale price at the time of completion, and units in mushrooming high-rises in major capital cities are the hardest hit, according to WBP Property Group, a company specialising in valuations and property advice.”
“Some investors are losing their deposit because they can’t settle, or they have to make up the funding shortfall.”
For more information on buying real-estate contact one of our buyer’s agents.