We’re heading for an oversupply of CBD apartments in Melbourne

We’re heading for an oversupply of apartments in Melbourne’s CBD with more than 60 apartment buildings now being marketed in the wider City of Melbourne – 27 released this year. This equates to 8100 apartments if all were built.

According to research by Oliver Hume more than 7500 new apartments will settle in three years, with 4829 apartments in 2012 and 2500 expected in 2013.

These apartments will add more than 35 per cent to the existing supply of about 30,000 apartments.
The record year for apartment completions was 2006, with 5000 on the market and we remember the oversupply that caused.

I’ve seen these cycles in the past with massive overbuilding and then a whole group of off the plan investors losing their shirts as they could not settle when the values of the their property on completion was significantly less than the contract price.

Remember these properties are mainly bought by local and overseas investors so this will also mean a glut of vacant rental properties all coming on the market at a time when there will be fewer tenants looking, as there are now fewer overseas students and temporary visa migrants – the typical tenants of these buildings.

Add to this the problems in getting finance for end purchases as banks are restricting their lending to high rise blocks and we are in for a repeat of what happened in previous cycles. A whole lot of very disappointed property investors who will say something like “it seemed like a good idea at the time.”