Australia has lost control of apartment supply

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By Leith van Onselen

The AFR reports that three out of four Melbourne development sites are now being sold to Chinese developers:

Chinese developers roared back into Melbourne in the final five months of 2016, snapping up three-quarters of development sites as they shrugged off concerns about apartment oversupply, tougher planning rules and higher property taxes.

Real estate agent CBRE said 75 per cent of the 45 Melbourne development sites they transacted between August and December were sold to mainland Chinese buyers. This compared with less than one in five sales to Chinese groups in the first seven months of the year…

“We’ve sold more properties to Chinese buyers in the past five months than in any other five-month period since 2009,” said CBRE national director Mark Wizel…

It is clear to me that Australia’s banks have lost control of the apartment supply curve, with the likely outcome a significant apartment glut to develop across Melbourne (as well as Brisbane) over coming years.

Australia’s banks woke up to the risks in the apartment space in late 2015 and stopped lending. But they have been out-flanked by Chinese capital, which seems intent to transfer the dying Chinese economic model of building ghost apartments to Australia.

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Essentially, Australian housing is slowly being Chinarised with the prospect of massive over-building leading to major gluts followed by stagnant or falling prices and rents.

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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.