At least twenty suburbs around Australia are expecting levels of apartment supply to balloon by between 11 percent and 34 percent next two years as huge levels of construction activity see massive volumes of new stock come online, the latest analysis shows.
In a recent blog post, CoreLogic head of research Cameron Kusher has revealed the suburbs expecting the highest levels of growth which are expected in apartment supply over the next two years.
Whilst Melbourne City leads the way in terms of absolute numbers being built, key suburbs of Brisbane lead the way in terms of the proportion of new stock to be added.
All up, assuming all apartments that have been approved are in fact built, Brisbane Inner, Brisbane Inner – North and Holland Park – Yeronga are expecting overall levels of apartment stock to swell by 33.6, 33.2 and 32.5 percent over the next two years.
Key suburbs in Melbourne are also expecting a surge in new additions, with the stock of Manningham-West, Darebin-North, Maribyrnong, Whitehorse-West, Brunswick-Coburg and Melbourne City all set to increase by between 21.1 percent and 33.6 percent (see table).
In terms of absolute volume, Melbourne City is expected to add a whopping 16,354 units over the next 24 months which Sydney Inner City and Brisbane Inner each expect to add more than 10,000 units.
The latest analysis highlights ongoing concerns about the likely effect of increasing levels of oversupply as new stock floods the market.
Such concerns are particularly prevalent in Brisbane, where vacancies at 3.2 percent (Domain Group) already sit on the high side of the 3.0 percent level which many analysts consider to be a balanced market.
Such is also the case with Melbourne, which with a rental vacancy rate of 2.9 percent currently has a balanced market but will have to absorb considerable volumes of new supply over the next two years.
In addition to concerns about oversupply, a further and related fear is that of settlement risk – the phenomenon whereby those who purchase apartments off the plan do not make good their promises when it comes to settlement.
Whilst Brisbane and Melbourne have the biggest exposure to such risk, Kusher warns that Sydney is also exposed amid the spiralling cost of new units and the city’s exposure to foreign purchasers who are finding money harder to come by.
Kusher also warns with respect to Sydney that unit construction is spreading to new locations and that the depth of some of these localities from a market perspective is untested and thus not clearly understood.