In looking beyond the myopia of recent coverage on Melbourne's apparent apartment oversupply, UDIA Victoria's Danni Addison considers population growth, housing affordability and weakening supply - three factors Addison believes contradict the concern of an "oversupply".
Factor #1: Population growth
The first thing to look at when assessing our property market is population growth.
Victoria is the fastest growing state in the nation in terms of population and according to State Government’s most recent forecasts, the population boom is only just getting started. Victoria's population is due to almost double between now and 2051, with Melbourne’s inner and middle suburbs expected to grow by almost 1 million in that time.
To put those figures into context, that means Melbourne will experience approximately the same volume of growth that occurred over the last 85 years, in the next 35. We have an increasing number of people to accommodate over the next 30-40 years at least, and that’s where Melbourne’s apartment market will come to fruition.
Factor #2: Housing affordability
We must not ignore the role apartments play in the housing affordability equation. The reality is that a decreasing number of Victorians can afford to buy or live in a house, and we need to give them other options. Melbourne needs a diverse range of housing for young people, low to middle income earners, pensioners and everyone in between – that way people across all walks of life get a choice on where they live.
As the price of houses continues to skyrocket, contemporary apartments will become a more realistic form of housing for a broadening range of people, especially for those who want to live in the inner city rather than being pushed 20 km out of the CBD.
Factor #3: Weakening supply
Melbourne saw relatively high levels of apartment supply in 2015 and 2016, which is what fuelled the oversupply claims. However, according to research presented by Charter Keck Cramer at UDIA’s last breakfast event on the Melbourne apartment market, we’re now seeing a significant decline in the number of new apartments coming to market, and that really challenges the perception of an oversupply. In fact, if we look at population projections and the rate at which new apartments are coming to market right now, it’s more likely Melbourne will experience an undersupply of apartments in the medium to long term.
All factors considered, the Melbourne apartment market is not oversupplied.
Danni Addison is the Chief Executive Officer of the Urban Development Institute of Australia in Victoria. In her role, Danni represents the best interests of players in Australia’s urban development industry including development companies, private investors, members of the finance, planning, engineering, government and legal industries.