CoreLogic: Brisbane most exposed to apartment glut

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CoreLogic’s Cameron Kusher has published an interesting blog post today examining the differences between unit supply in Sydney compared with Melbourne and Brisbane:

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The above chart highlights the number of units currently under construction across New South Wales, Victoria and Queensland. Unfortunately the data is not available at a capital city level however, what is occurring in each of these states is a proxy for the capital city unit markets. At the end of the June 2016 quarter, there were 55,682 units under construction across New South Wales, 46,676 under construction in Victoria and 31,070 under construction in Queensland. If you look at the long-run averages you can see that the current unit construction boom is unlike anything we’ve ever seen before. The long-run averages for units under construction are: 16,194 in New South Wales, 10,139 in Victoria and 7,429 in Queensland. While each state has seen a substantial surge in units under construction, the magnitude of the increase relative to the long-run averages is much greater in Victoria and Queensland than in New South Wales.

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The above chart shows the expected increase in the proportion of units in each capital city over the next 24 months if everything that is approved and expected to be built over the next 24 months is successfully built. Brisbane is set to see the biggest uplift in total unit stock followed by Melbourne and clearly in more immature unit markets this carries a risk. Importantly though, the potential uplift in unit stock in Sydney is not immaterial at 8.5% although it is lower than both Brisbane and Melbourne.

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The above table looks at the SA3 regions nationally that have the greatest number of potential new unit completions over the next 24 months. Predictably regions of Sydney, Melbourne and Brisbane dominate the list. In Melbourne and Brisbane the regions listed are generally located close to the city, within around 10 kilometres. In Sydney, the regions listed include inner-city locations as well as regions further afield, particularly along the transport spines and Western Sydney. To some extent this does disperse the risk a little more…

When you look at all these factors combined it does appear that the new unit market in Sydney is less risky than the Melbourne and Brisbane markets.

One factor not mentioned above is that population growth is also much weaker in Queensland (Brisbane), which makes the potential risk of oversupply much greater (other things equal):

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.