Westpac does not buy into apartment oversupply fear
There has been plenty of talk and hype in the news about a potential apartment oversupply in Australia, particularly for Melbourne and Sydney, but one major bank that is not buying into this fear is Westpac.
Westpac has stated that the construction of these new apartments in both Melbourne and Sydney follow the dwelling demands for each city.
Head of Westpac’s flagship consumer bank, George Frazis revealed that over the next two years, Sydney will face a continuing shortage of homes, whilst Melbourne’s property price growth will start to slow down as supply starts to meet demand.
Over these two years, Sydney will see approximately 10,000 new apartments reach completion and another 16,000 new apartments in Melbourne.
According to Frazis, “If you look at NSW and Sydney, we still have a structural shortage of housing in Sydney because of the population growth and the pent-up demand. Even if we look at what’s coming online over the next year or two, we’ll still have structural undersupply.”
Melbourne’s property market should start to stabilise and should not negatively impact on customers. According to statistics from the Australian Bureau of Statistics (ABS), Australia’s population is set to increase by 411,598 persons per year over the next four years until 2020, or by 1,646,393 persons. Out of all states and territories, Victoria will see the highest population growth, with an addition of 424,415 persons expected in just four years. The state also requires 163,236 new dwellings and there is currently a shortfall of 13,006 dwellings. With this continued population growth, more housing is still required to meet this demand.
Statistics also show that New South Wales will see an addition of 400,417 persons across four years to 2020 and will also require another 143,000 new dwellings.
We might be seeing heightened levels of construction happening across our eastern capital cities, but the reality is we still face a property supply shortage. During 2006 and 2014 Sydney experienced massive underbuilding and there was a major undersupply of housing. These last few years however have been making up for lost time through new property construction, which has led to significant price growth.
Westpac has however maintained a more conservative approach for the inner-city units. The major brank has recently lowered its exposure, whilst some of its valuations on Melbourne units being settled were lower than the purchase price. In spite of this, the number of inner-city apartment loans more than 90 days behind their repayments were lower, compared to the average across the bank’s mortgage book.
There has also been a recent study from the Reserve Bank of Australia (RBA) that stated that unless property prices fall by more than 25%, bank losses should remain “very low”.
Both Sydney and Melbourne have strong economies, with more people choosing to live and study here for better employment opportunities and a work life balance. Melbourne has also been named the world’s most liveable city in the world in 2016 for the sixth year running in the Economist Intelligence Unit’s Liveability Survey, adding to the city’s apartment appeal.
If you would like to find out more about this oversupply myth, then why not speak to the experts at iBuyNew. Our Property Consultants have years of experience working in the property industry and can confirm the best suburbs to buy and invest in property right now and which suburbs to avoid where there is an oversupply of new property.
Give the iBuyNew team a call today on 1300 123 463 to learn more about buying new apartments off the plan in Sydney, Melbourne or Brisbane.
Published on 22nd of November 2016 by Marty Stanowich