Melbourne apartment glut ‘overstated’: agents

Doomsday predictions for Melbourne’s apartment development market are “overstated”, with oversupply not nearly as bad as reports suggest, one agent says.

Speaking at The Wingate Group and CBRE’s Melbourne Outlook event, CBRE’s Jozef Dickinson says that while Melbourne is in the midst of a significant amount of apartment tower construction, it will be some time before much of it is ready to live in.

“I think the oversupply piece is certainly overstated, and some of the numbers are definitely skewed by potential schemes rather than actual developments,” Dickinson says.

Recent reports such as NAB’s latest Housing Market Report predict a 3% fall in unit prices this year due to a glut of new apartments in the CBD and inner city.

“The supply situation in Melbourne is not very conducive to strong capital growth,” NAB’s report says.

But Dickinson says that the situation and sentiment on the ground is markedly different, and that the number of new towers being built does not necessarily equate to an oversupply.

Some agents maintain that interest in Melbourne apartments has remained strong.

“In terms of the CBD, Southbank, when we see some of the numbers that are bandied around in terms of supply, we do need to remember that it’s not supply until it’s actually built,” he says.

“If we actually break down the time it’s a pretty consistent delivery of apartments over the next five-year period, so I don’t think it’s as bulky as some of these reports are saying.”

Despite the vacancy rate among Melbourne units rising from 2.5% to 2.7% during June, Dickinson says he is still seeing intense interest from potential tenants for apartments in newly completed towers.

I think the oversupply piece is certainly overstated

“The rental demand when these things are completed is still really high at the moment.”

Wingate director Mark Harrison agrees, saying apartment supply data doesn’t always paint an accurate picture.

“A lot of the data that’s published about supply comes on approvals granted rather than product that’s actually in construction,” Harrison says.

“There’s a lot of work to be done (from) you get the approval to when you build.”