Apartment oversupply hits Melbourne landlords

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By Leith van Onselen

Australian Property Monitors (APM) has today released its rental report for the December quarter of 2013, which revealed a sharp divergence in rental price growth across Australia and between houses and units & apartments:

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As shown above, Sydney house rents have flatlined whereas unit rental growth is powering. However, the opposite is the case in Melbourne, where house rents are finally recording growth after years of stagnation, whereas unit rents declined sharply over the quarter for a flat result over the year.

According to APM’s Andrew Wilson, “Melbourne has even more supply coming on this year and there is not enough demand to keep up with it”, suggesting that unit rental prices will continue to come under pressure.

This view is supported by the next chart from the Australian Bureau of Statistics (ABS), which shows that unit & apartment approvals in Melbourne has been running at an elevated level for an prolonged period of time:

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Not surprisingly then, Melbourne also has the lowest rental yields on offer, although this has been the case for quite some years now:

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It’s also worth noting from the above that Sydney’s rental yields have fallen significantly as price growth has far outpaced rental growth.

The full APM release is available here.

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8 Responses to “ “Apartment oversupply hits Melbourne landlords”

  1. thomickers says:

    In burwood, deakin uni built a100-150 room student apartments on campus. On top of that, emerging markets took a beating this year and thus there will be less international student enrolements. Sqm research postcode3125 illustrates the issue

    • OMG says:

      I am pretty close by and there has definitely been a flood of apartments built along Burwood Hwy, a lot of student accommodation at around 24sqm per dwelling

      The same situation is happening across at Monash Clayton, a flood of apartments along Blackburn rd and now Monash Uni has built an additional couple hundred on campus

      I’d love to see some stats on the percentage of local students attending these universities compared to foreign students

      • Ozquoll says:

        The students have got to live somewhere i guess – but i feel sorry for the ones crammed into those eaveless northfacing dogboxes on burwood road. They must roast in there, even when its not 44 degrees like today.

        As to whether they are foreign students, they surely must be – no local kid would live in a suburb as boring as burwood. Deakin really is the only thing there.

      • thomickers says:

        funny thing is… for house sharing in burwood, the median room rent is $150-160/week

        up from 2010 when it was more like $110-$120/week.

        current asking rents cannot continue like that.

      • balkanghost says:

        Many developments for international students were promoted/sold to both local and international investors on basis of more university students, but me thinks they have over reached themselves, and quality issues precludes locals.

        Monash has high numbers of international students, 20k out of 60k total, probably higher than most.

        However, even if domestic i.e. citizens or PR, many locals may assume they are international from their ‘appearance’. Older generation friends of the family claim that around Monash University they are ‘Asian students’ who get looked after by free study, apartments, benefits, automatic immigration etc.. (of course none is true)

        International students at e.g. Monash pay $20k+ in fees annually, and are required to have access to $AUD16k living costs, and most are not rich, simply middle class with aspirations.

        These apartments might be dog boxes but how else does one expect a student to live, and how is it different from a smallroom in a college etc. like many Oz students live? Many probably start by homestay, i.e. subsidising Australian families’ mortgages, then share an apartment with friends, spending AUD16k+ locally.

  2. flawse says:

    No problem. Just bring more migrants and settle them in Melbourne.

  3. ClementF says:

    sadly flawse, it appears that the standard response in Victoria to date has been to do just that, bring in the migrants. I have been considering for a while what difference it will make having fewer boat people and whether the international student numbers will hold up. I consider that the return of the exchange rate to more appropriate levels will maintain overseas student growth and compensate for fewer boat people.

    Two other issues arise – (a) since Melbourne’s economy appears to be driven by education and housing construction is Victoria thus in recession and (b) who is going to live in all these minute apartments that are popping up everywhere. I live in North Melbourne and all the new buildings have a lot of tiny units.