Although 140,000 apartments are approved for construction in Melbourne between 2016 and 2018, only 35,000 will eventually be completed, said Mark Mendel, CEO of off-the-plan property website IBuyNew.
In an interview with The Real Estate Conversation
, Mendal said that the number of apartments approved for construction significantly inflates expectations for the number of apartments actually built.
This expectation creates a fear of oversupply, he told Australian Broker
“It doesn’t give a true reflection of what’s actually happening in the market in terms of actual construction. A more accurate indication is the number of projects that are either for sale or under construction at any point in time rather than what’s going through planning approval.”
This is because a lot of these projects very rarely see the light of day, he said.
Of particular importance at present was the move by the big four banks to restrict their lending policies for apartments in Melbourne to those greater than 50m2
“Any project that has been designed in the last two years with apartments that are less than 50m2
– developers might think twice before releasing them to the market and might do a re-design to meet that minimum criteria set up by the planning panel.”
While the undersupply in Melbourne won’t be severe, there will be pockets such as Southbank where too many apartments are being built, he said.
“If you look at the overall Melbourne metro market, including all the fringe suburbs of the city out to 15km, it’ll be an undersupply of properties because the population growth rate is so strong and it hasn’t really slowed for a number of years. We don’t anticipate it will slow in the near future.”
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