Why Australia’s housing oversupply is worse than thought

We already know that Australia is headed for a massive oversupply of housing, especially across Sydney and Melbourne.

Even before COVID-19 hit, Sydney and Melbourne were headed into oversupply, as illustrated in the charts below:

The situation has obviously worsened, with immigration collapsing at the same time as apartment construction rates are running above decade averages across these two cities:

According to Norman Day, Lecturer in Architecture at Swinburne University of Technology, COVID-19 and the widespread adoption of working from home will make many office building redundant meaning they will have to be converted into dwellings:

Buildings that are no longer fit for purpose, or not required in a new detached working environment, could be repurposed as housing. Empty office blocks, shops and stores and unused teaching facilities could all be recycled for social and community low-cost rental housing… underused office buildings will not be needed as offices. They can become part of the new model for blended home-and-work operations…

As a byproduct of repurposing old buildings, we’d benefit the environment. Re-use conserves natural resources and minimises the need for new materials. That’s because these adapted buildings are effectively already half built.

If things play out as suggested by Norman Day, then this means that Australia’s dwelling oversupply will be worse than thought. It will also mean less dwellings will need to be built, adversely impacting construction activity.

Unconventional Economist
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  1. How do you economically and profitably convert office space to residential considering installing more kitchens, bathroom and associated expensive utility services.
    What does theoretician Day have to say on this?

    • been done before. Plumbing is already on each floor and needs to be spread across 3-4 areas now depending on how many apartments one wants to put per floor.
      Easier than you think.

      • correct
        also office building have higher ceilings so adding all the required utilities in that space would not be very costly at all – cheaper than adding a bathroom in a suburban house where such change would require demolition of floor

    • Buckets. Kitchen scraps go in there too. When full just empty it out into the street below. Just like other third world countries.

    • Floor plate sizes and dimensions to window areas are all wrong.
      Cant convert (most) office to resi due to limited windows.

  2. I have had community relations parties with various girls in the Brisbane Valley and surrounding areas i.e. Newstead etc. The number of empty apartments is astonishing when you look out the balcony. One was the only person on her level and said there was like only 10 in the whole building. 15 floors of emptiness.

  3. we were building more homes than required for living since WWII with very few short period exemptions
    even during the slowest construction periods since 90s were we building one new home for less than 2 new residents while our average household size remained stable

    • Rubbish.
      My grandmother was one of 10 children. 12 people living in a house.
      Covid-deniers like you, I mean shortage-deniers like you statistically claim that because I am not living in a house of 12, therefore there is an oversupply of housing.
      High rents and high price for decent housing is all the proof one needs of the severe shortage.

      • thats a big call claw. i dont agree with doctor either but lots of data shows there is an oversupply, from electricity and water data to airbnb to empty chinese owned properties etc .when bubbles burst they almost always reveal an oversupply to the expose the shortage myth that pro bubble people push

  4. I was told there is a couple of new buildings in Melb city, you know up state library, they are selling units for 50% discount, genuine not one off
    I spoke to a senior property manager in commercial, he said it’s a debacle and rents down 65% for many properties and no chance of finding a tenant.

        • Which is why the government will be opening teh gates to hordes of foreign students as soon as they can!

          • the horde that matters, Chinese with money, is not coming back. The horde that needs to do food delivery in order to sustain itself will not be able to find any work so that horde is not coming too.
            There is no work and there is no treatment for the virus yet.

          • You forgot to include parentheses: ‘students’.

            Very important when not talking literally

  5. ashentegraMEMBER

    Good to see him recognise ‘unused teaching facilities’ as part of the oversupply.

    The sale of citizenship under cover of education is O. V. E. R.

  6. reusachtigeMEMBER

    This is hilarious. I’ve been told that actual proper houses to rent in undesirable places like the inner west of Sydney are actually harder to come by at the moment and just as hard as ever in desirable locations east of ANZAC parade and the Northern Beaches. So I call rubbish!

    • Display NameMEMBER

      I track the sum of rentals in Petersham and Stanmore. I am renting in Petersham currently. Before Covid it was ~750, now oscillates 1100-1200 rentals in the two suburbs. I think a lot of people have upgraded from sh!thole to better sh!thole in the inner west as rents have tanked.

      • +1
        Not a good time for investors owning stock standard 1970s apartments in places like Ashfield.

        • If they bought them and paid 3 times a stock standard 1970s wage then they would be raking in money now.
          There has been an epic rise in rents. What once rented for $50 per week now rents for $600 per week. These high rents combined with low interest rates and high future expectations are what causes purchase prices to be so high.
          Will history repeat with more massive rent rises?

  7. I dont understand how there can be a glut in housing. In WA i see developers/owners selling townhouses and flats that seem outrageously over priced to me. 20km from perth cbd mutltiple 2×1 advertised for 450k+.. In the same area 3×2 advertised for 685k+ Perth metro fringe 3×2 are at least 550k+. And these dont have a backyard at all. Its insane. And they sell. Ive been watching this for well over 2 years.

    • I think glut is mainly in eastern states; in Perth it appears that there isnt much over supply at the moment, especially with people returning and FIFO Employees moving here…i think 12 months time there might be more supply with this home builder scheme resulting in higher home build numbers.

    • High rents and high price for decent housing is all the proof one needs of the severe shortage.

    • I see the same in Brissy, AM. Some developer puts up a row of tiny townhouses with paper-thin walls and people are falling over themselves to buy these sh#t boxes. We’re talking $500k plus. No garden, tiny balcony, that’s it. It seems to me that if something is at a particular price point it’s good! No assessment of relative value or anything.

    • Someone ElseMEMBER

      You’re looking in all the wrong places. The Perth metro fringe I know (ie South Fremantle & Hamilton Hill) have MANY places, 3 bedroom plus on 500-700m² for $400-500k. My wife’s neighbour rejected offers under $600k for a 3 bed townhouse only last January, when he didn’t sell. He’s trying to sell again.

      I suppose I could buy the place next to my wife and cut down the commute for passion runs.