Melbourne apartments too small, too expensive, but no housing crash coming: Monash's Bob Birrell

Melbourne is heading for an oversupply of apartments as families head to the outer suburbs for more affordable housing to suit their needs, according to a new report by Monash University.

The report also slams the city’s current urban expansion strategy.

Titled The End of Affordable Housing in Melbourne and written by Monash University population expert Dr Bob Birrell and his team of researchers, it shows that new apartments are too small and too expensive to appeal to those family-friendly housing.

The report notes that few apartments of 110 square metres or more are being built in Melbourne.

Instead, much smaller apartments measuring less than 70 square metres are being built in the CBD and its surrounds, which are being purchased off-the-plan by investors.

“For projects in planning or under construction, the trend is towards even smaller apartments,” says the Monash report, which warns that an oversupply of these small apartments is looming.

The report also notes that cost of infill (undeveloped urban land) in Melbourne has risen to levels that most new households cannot afford because the cost of the land on which to build has escalated.

It warns that those planning Melbourne’s future have not come to grips with the causes of Melbourne’s affordability crisis, primarily to do with the costs of producing apartments, infill and fringe housing.

“Proposals to facilitate even more high-rise apartment blocks or to extend the urban growth boundary (UGB) ever further outwards —the current Victorian government’s strategy — will not provide a solution,” says the report.

However, the report does not expect a housing crash in Melbourne.

Instead, it says it is likely there will be a slowdown in dwelling construction in Melbourne because new households cannot afford the product being offered.