Why Melbourne does not have an apartment oversupply
It’s easy to think that with all the apartment construction currently underway in Melbourne that this capital city is undergoing an apartment oversupply. However, despite latest reports and media coverage spinning stories that an oversupply is looming, Melbourne will not be seeing an apartment oversupply crisis anytime soon.
To be able to understand what is actually happening in the Melbourne property market, we need to look at all of the facts and there are five key reasons why Melbourne does not have an apartment oversupply.
5 Reasons why Melbourne does not have an apartment oversupply
1. Melbourne population growing Firstly, believe it or not, but the population of Melbourne is on the rise, and the city is set to become Australia’s largest capital city by 2050. Melbourne is currently the fastest growing city in Australia, already overtaking Sydney in terms of growth, and will be the first city to reach 8 million by 2055. Each year, the population of Melbourne grows by around 100,000 people, and the number of students moving here from interstate and abroad are a major contributor.
2. Many apartment developments are failing to get off the ground Another important reason why Melbourne does not have an apartment oversupply is down to the number of new developments that are failing to start. This is due to a number of reasons including lenders becoming stricter with their lending policies and developers finding it tougher to be approved finance, especially if they have little or no experience.
Another reason is that some developers are acquiring permits for apartments, but have no intention of actually building them. This is massively inflating figures. For example, the Commonwealth Bank of Australia revealed that more than 140,000 apartments were approved across Melbourne, with only 35,000 expected to be completed between 2016-2018. These figures suggest that an undersupply of high rise apartments in the future is more likely than an apartment oversupply.
3. Not all suburbs in Melbourne has an oversupply One mistake that many people believe is that the whole of Melbourne is going through an apartment oversupply. However, this is not true. Not all suburbs are suffering from an apartment oversupply in Melbourne. The truth is that inner-city areas like the CBD and Docklands which are home to smaller studio, one and two bedroom apartments in high-rise apartment developments are more likely to face oversupply. This is because these apartments are targeted more for the overseas buyer, rather than the owner occupier.
4. High demand for quality and larger apartments With the new Better Apartment Design Standards soon to be introduced in March 2017 by the Victorian government, there is an increased demand for higher quality and larger apartments. Buyers want a higher quality of life, with lifestyle amenities close to hand and a better quality home. These new standards are aimed to stop developers from building tiny box apartments without windows and good air circulation. This means that apartments will now have to meet strict standards for apartment size, adequate natural light, natural air flow and functional storage as well as outdoor space and landscaping plus much more.
5. Owner occupier market is growing Finally, the owner occupier market is also growing. There is now a greater demand from young professionals, smaller families as well as retirees looking to downsize and live in new apartments. Apartments are generally more affordable to buy, especially if bought off the plan and offer an easier way to enter the property market. Apartments also tend to be well located close to amenities, transport and schools creating plenty of lifestyle appeal, whilst fitted with high quality fittings and fixtures and also are much more energy efficient to cater for modern day living.
With this continued demand for larger and higher quality apartments both now and in the future, it is essential that Melbourne continues to build new apartment developments to cater for a rapidly growing population, which is indicating that it won’t be slowing down anytime soon.
If Melbourne wants to continue to be recognised as the world’s most liveable city, which it has been awarded six years in a row by the Economist Intelligence Unit’s liveability survey, then it needs to continue to build quality apartment developments. Melbournians also need to face facts that apartment living is becoming the new norm, especially if we want a life of luxury and convenience.
Published on 9th of February 2017 by Marty Stanowich