At 30 percent cheaper than Sydney, Melbourne has apartment advantage without oversupply or bubble: Charter Keck

At 30 percent cheaper than Sydney, Melbourne has apartment advantage without oversupply or bubble: Charter Keck
At 30 percent cheaper than Sydney, Melbourne has apartment advantage without oversupply or bubble: Charter Keck

Melbourne has no bubble and its apartment market was not even close to reaching an oversupply, according to Charter Keck Cramer research director, Robert Papaleo.

He says there has been misinformation surrounding the issue.

“The structural tailwinds supporting Melbourne apartment market outweigh the cyclical headwinds,” Papaleo told attendees at the recent Australian Property Institute and REIV’s State of the Market 2017 State of Market conference.

“There is no apartment supply bubble and oversupply is not imminent.

"Melbourne is experiencing unprecedented supply but it not oversupplied,”

Papaleo said Melbourne’s housing market is performing strongly because it is at a 30% discount to Sydney, compared to 15% cheaper in 2011.

“This will drive more migration to Melbourne," said Papaleo who added that Melbourne remains attractive to international students.

He said that one year ago, 24,000 apartments were expected to be completed in 2017 across metropolitan Melbourne, but the latest figures suggest 16,000 apartments are now expected to completed.

“We are heading towards a situation where 16,000 apartments a year will be completed over the new few years to 2020."

It comes off the supply peak of 19,000 apartments in 2016, he said.

“Oversupply is not evident in the market.

"Two years ago, in 2015, 9,000 apartments were sold across Melbourne’s Central City Region.

"In 2016, 6,000 apartments were sold; despite the fall it was still a good result.

"And developers are holding back supply,” he said.

“Obviously, if interest rates move, there will be an impact on that price growth.

"What we are seeing at the moment, though, is the Melbourne housing market is truly reflecting its attractiveness to local investors, local owner occupiers, as well as, in particular segments – such as the apartment sector as well as the greenfield market – international investors as well as interstate investors continue to see relative value in Melbourne prices compared to the places that capital is coming from, whether that be Sydney, or whether that be Singapore,” he said, as reported by Australian Property Journal.

 

Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of Australia's most respected property journalists, having been at the top of the game since the early 1980s. Jonathan co-founded the property industry website Property Observer and has written for national and international publications.

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Melbourne Property Bubble

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