The Melbourne housing construction boom is set to continue, with an article today in Property Observer claiming that a record number of apartments will be completed in Melbourne in 2012 and 2013, followed by a slump in construction activity:
Apartment construction in Melbourne is likely to peak in 2013 with as many as 14,000 apartments being completed, according to forecasts by consulting and valuations firm Charter Keck Cramer (CKC).
However, in 2014 the great spurt in the apartment construction, which kicked off in 2011, will at least halve and possibly fall as low as just 4,000 apartments, taking the market back to average annual rate achieved from 2000 to 2011, the firm says.
In total, about 31,000 apartments are set to be completed or commence construction between now and 2014, with most of these to be built in the inner city.
Around 7,500 apartments will be built within 10 kilometres of the city, more than 4,400 in the middle to outer ring, and only 800 in the outer-growth areas.
Since 2010 apartment construction in Melbourne has risen steeply, with 5,000 constructed in 2010 and nearly 8,000 constructed in 2011 – compared with the annual average of just over 4,000.
Most of this has been with a 2.5-kilometre radius of the CBD. About 9,000 apartments are under construction currently…
Robert Papaleo, head of research at CKC, says up until 2015 there will be no shortage of apartments available in the market, but the question remains: “will there be enough owner-occupier demand”.
“To date the product has been well received, but we now have a softer rental market and population growth is slowing,” he tells Property Observer.
CKC’s analysis is supported by the Australian Bureau of Statistics dwelling approvals data, which shows a surge in apartment approvals in 2010 and early 2011, followed by a drop-off in approvals more recently (see below chart). Given the significant time lag from approval to completion, its stands to reason that these apartments will hit the market in 2012 and 2013, followed by a slump in activity.
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So it looks like Australia’s most oversupplied housing market – Melbourne – is set to get much worse. Don’t say I didn’t warn you!
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.
