Melbourne needs an oversupply
SQM Research managing director Louis Christopher claims that Melbourne needs an oversupply of apartments as vacancy rates tighten throughout the city.
There is little doubt that Melbourne did have an oversupply of residential units but it now appears that vacancy rates in Melbourne are going ‘against the trend’ and more housing developments are needed.
22,000 new homes needed for Victoria over the next year
There are certainly small pockets of the inner city where there are still more units than required and it is still the case that Melbourne needs more diversity of housing types and dedicated investment in affordable and social housing. The middle ring and outer suburbs, in most cases, still have very low vacancy rates and house prices have continued to increase since 2012.
The concern of most property investors has been the oversupply of units in the CBD area but now, according to SQM, even the unit market is tightening and yields throughout the city for landlords are on the rise.
BIS Shrapnel has warned of a “huge apartment hangover” due to oversupply in the Melbourne’s apartment markets but the huge increases in population in Australia’s fastest growing city may prove this forecast to be false.
It is now estimated there will be 22,200 more homes than necessary in Victoria by 2018. Also, it is estimated that in n Victoria almost 40 per cent of tenants are paying over a third of their income in rent.
Many property investors have been very concerned about the quantity, size and quality of many of the apartments built in the CBD area of Melbourne over the last few years but the more astute investor has realised that Melbourne needs more than small inner-city units to satisfy the continuing demands of a growing population.
Even if SQM have it wrong here, there is still opportunity for price growth in the middle and outer suburbs as Melbourne sees a tightening supply and some needed yield growth.
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