Australia’s apartment boom reaches record high
The latest CommBank Property Insights report by CBA’s Kevin Stanley, Head of Property Strategy and Research, Corporate Financial Services division has been released, and shows that Australia is enjoying the biggest apartment development boom in its history — with an estimated 80,000 apartments currently under construction in Australia’s major capital cities and another 117,000 approved or in the off-the-plan marketing phase.
The report (download) also contains charts ranking the top 20 Australian suburbs for apartment completions in 2016 and 2017, using CBA data and analysis.
Of the findings, Mr Stanley said, “The development cycle is in full swing, with an estimated 80,000 apartments under construction. Local market impacts will vary enormously — depending on the concentration of completions, along with the level of demand for these properties from buyers and occupiers.
“Inner Melbourne and inner Brisbane will experience the highest concentration of apartment completions in absolute terms, in the next two years. As a result, these two locations will be subject to rising vacancy and reduced rents, leading to drops in property values and greater settlement risk.
“In Sydney, the broader geographic spread of completions across a large number of suburbs, together with a greater depth to the buyer and occupier market, is likely to mitigate these risks.
“While the supply-side in Perth is heavily concentrated, no Perth suburbs appear on the top 20 completions lists. However, the recent fall in population growth and the already high vacancy rate appears to be a more important driver in future vacancy and prices. Already, Perth is the only metropolitan area where the median apartment price is falling (-2.6% year-on-year) and vacancy is above the equilibrium (3.8%).
“Adelaide and Canberra have much smaller supply pipelines so market demand for apartments is likely to be reached sooner in the cycle. When this happens, supply is likely to adjust to a more sustainable level.”
Other key insights in the report include:
- Melbourne is leading the way in the apartment development sector nationally, coming off a relatively low base in high density, high rise living.
- High concentrations of apartment completions will occur in a short space of time in central Melbourne and Brisbane from 2016 — and are likely to lead to increased vacancies.
- It may be several years before some cities have the populations needed to absorb the new apartments in development.
- Sydney stands out nationally as a city with the most even distribution of apartment developments across the metropolitan area, which will help boost their occupation when completed.