Melbourne’s oversupply of new apartments overstated
There have been growing concerns within the property industry that Melbourne is facing an oversupply of new apartments, but is this really the case?
According to CoreLogic, the inner-city areas of Melbourne expects to receive 14,353 new apartments over the next 24 months, which is more than both Brisbane and Sydney with 10,189 and 9,376 new apartments expected for each of these cities respectively; however, even though Melbourne has the highest number of apartments expected to complete, the media is causing hype in the marketplace and the facts are not being properly portrayed.
Victoria expects a significant population increase
Firstly, the population within Victoria is growing significantly. A higher population means more new homes are required to fulfil this increase in demand and thinking about the future population growth now is particularly important to avoid having to play catch up and rush jobs later down the track.
Victoria in Future 2016 is the official State Government’s projections of population and households and based on the latest (30 June 2015) population estimates from the Australian Bureau of Statistics (ABS). It is predicted that by 2051, Victoria will be home to 10.1 million people, almost double from 5.5million in 2011. It is expected that Greater Melbourne will house 8 million people, with 2.1 million people living within Victoria’s regions.
Within Central Melbourne itself, 100,200 people were resident here in 2011 which is anticipated to reach 229,800 by 2031, which is over double. With population more than doubling, households will need to as well from 48,900 in 2011 to 114,400 households in 2031. Over these next 15 years, Melbourne’s inner and middle suburbs are expected to grow by nearly 1 million people, whilst an additional 2.2 million dwellings are required to house the state’s population by 2051. So over the course of the next 35 years, to meet this demand we will require almost 63,000 new dwellings per year.
Almost 63,000 new dwellings needed per year
With Melbourne expected to receive 14,353 new apartments over the next 24 months, this is well below the 63,000 new dwellings requirement per annum adding to the fact that Melbourne’s oversupply of new apartments is overstated and greatly exaggerated.
One person households are also expected to increase, where 25% of household types in Victoria in 2011 were one person households, increasing to 27% in 2031 to 28% in 2051. This will be mainly from older persons at retirement looking to downsize and also the fact that we are living for longer. Households comprising families with children though are expected to fall by 2051 from 43% in 2011 to 40% in 2051.
Victoria’s population will be growing through a number of means including 1.8 million through natural increase, whilst 2.8 million will be generated through net migration, of which 2.6 million will be from overseas migration.
With such a substantial increase in the population, new dwellings will be required, and apartments are the favourite type of household to live in. Today, people want convenience more than ever before and the majority of new apartments are situated in areas close to transport, retail, schools, parks and dining, particularly within the inner and middle ring suburbs.
New apartments becoming more desirable
We want to be able to reach work quickly and not travel long distances. We also want all of our amenities close to home, allowing us to live a fulfilled lifestyle, within walking distance of our everyday amenities and services. For many us, we are also time poor, particularly professionals who may work long hours in the city or those in retirement who don’t have the ability to maintain a garden. We no longer have time to mow the lawn or make repairs around the house, so living in a new apartment provides low maintenance living and is an attractive option for many.
Apartments are often much more affordable than houses and is an easier way to enter the property market, whether as an owner occupier or an investor and even pet owners are being accommodated more.
Melbourne named most liveable city in the world
Melbourne has also recently been named as the world’s most liveable city for the sixth year in a row by the Economist Intelligence Unit’s liveability survey. With more and more people wanting to live in Melbourne and Victoria, it is important that the state meets this expected demand through supply, otherwise this capital city could end up losing its world title by not having enough housing to meet the demand.
However, there are new building regulations and design standards coming into effect to make apartment living much more desirable. Gone are the apartments without good ventilation and natural lighting. Now, new measures have to be met such as all living areas to include a window, have an area of private open space such as a balcony and energy efficient apartments. With these better design standards being enforced, this will make apartment living much more appealing and desirable within Melbourne and Victoria.
Not all apartment buildings will proceed
Another good reason why new apartments are not oversupplying the market is the fact that we are led to believe there is an oversupply in the first place through the number of buildings approvals and media hype. However, it is important to note that not all of these apartments will actually go ahead, settle and complete. This is for a number of reasons including developers being unable to attain the finance they need to proceed.
We should therefore be focusing on the bigger picture and not concentrate on how many building approvals there are, but look at what the average completion rate is.
Tougher lending policies
There are currently tough policies in place for buyers and investors to purchase property, but what people might not know is that there are even tougher lending policies for developers. Those with no track record or even limited track record are finding getting lending from banks and lenders particularly tough and some developers are even getting a straight ‘no’ from their lender.
According to Charter Keck Cramer’s State of the Market report (period ending June 2016), the number of projects that are under construction or recently completed is actually lower than the long term averages. Since January 2016, rental vacancy rates have also tightened whilst sales have continued to grow.
Other factors that might restrict the number of apartments being built include the increase to taxes for foreign buyers including stamp duty increasing from 3 per cent to 7 per cent as well as increasing the land tax surcharge for absentee owners from 0.5 per cent to 1.5 per cent. These increases however could have a damaging effect on the Victorian economy, particularly as we rely on foreign investment to get new properties off the ground in the first place.
Of course there may be some areas, especially within the city that might have an extremely high concentration of new apartments completing in the next 12 to 24 months. If this is something that you are worried about then it’s best to speak to one of our Property Consultants at iBuyNew who can guide you on where you should be buying and the type of property you should be buying.
Both Melbourne and Sydney are two of the strongest cities within Australia, and buying property is one of the safest means of investment. However, it is important to remember that a property purchase should be for the long term of at least ten years or more, where properties do tend to double in value over this time period.
Find out more today about buying new apartments Melbourne and why Melbourne’s oversupply of new apartments is overstated by calling the iBuyNew team today on 1300 123 463.
Published on 12th of September 2016 by Marty Stanowich