Propertyology’s comprehensive study of housing supply across capital cities and regional centres has forecast mixed fortunes for the coming three years.
Our analysis found that, while the total national volume of new dwellings approved is moderating after four years of record starts, some locations are stuck in oversupply territory at the same time as other markets tightening.
Over the last decade, housing supply at a macro-level saw an average of 170,577 additional dwellings completed each year. The average annual dwelling supply over the last four years was 200,034 – significantly more than the 10-year average.
The excess housing supply in Australia’s pipeline has been building up for about three years however, the momentum in buyer activity that had accumulated during the Sydney-Melbourne boom was acting as somewhat of a smoke screen over the true position.
Propertyology’s research also confirms that the “age of the attached dwelling” has well and truly set in with nearly 50 per cent of new dwellings completed nationally over the year ending December 2017 being units or townhouses.
The percentages differed drastically depending on location, too, with attached dwellings comprising 78 per cent of new supply in Canberra, 68 per cent in Sydney, and about 54 per cent in both Melbourne and Brisbane.
Sydney and Melbourne still a concern
There were clear signs of continued oversupply in parts of Sydney and Melbourne as evidenced by declining property prices, increasing vacancy rates and easing rents.
As for future supply, while there’s been a slight easing in Sydney building approval volumes over the past 18 months, it’s still well above historical averages.
Of more concern is the spike in Melbourne’s building approval volumes over the past 12 months. While it’s highly likely that many of these projects, especially high-rise apartments, will be put on the shelf for a few years, developers don’t lodge building applications for practice. Propertyology expressed concern about Melbourne in this report from April 2016.
City locations likely to underperform
Residential construction has been on steroids in Sydney and Melbourne over the past few years and a number of areas were likely to underperform due to oversupply.
Analysis of building approval volumes at a granular level provides insight in to individual municipalities where property values and rents, primarily apartments, are likely to soften most.
In Sydney, this includes:
- EAST: Rockdale and Sutherland
- SOUTH: Canterbury and Liverpool
- NORTH: Ryde, Hornsby, The Hills
- WEST: Blacktown, Parramatta
- INNER-WEST: Botany Bay, Leichhardt and Marrickville
- OUTER SOUTH-WEST: Camden
In Melbourne, this includes:
- CENTRAL: Melbourne city, Boroondarra, Yarra
- EAST: Glen Eira, Whitehorse, Casey, Cardinia
- WEST: Maribyrnong
- NORTH: Darebin, Moreland, Hume
Brisbane back in balance but Perth problematic
After its well-publicised period of oversupply, the Sunshine State’s capital was largely back in balance.
The 7,718 apartment approvals last financial year in Brisbane represents half of the 15,835 approved two years earlier but, is still well above the 4,500 apartments or less per year prior to 2013. While caution still needs to be exercised with new apartments, Brisbane’s housing supply stock is back close to equilibrium.
Dwelling approvals in Perth started falling back in 2014/15, which means its housing supply is back to normal levels.
However, that doesn’t mean that the Perth market was in tip-top shape.
Perth’s population growth of 20,000 people last year is well down on the 50,000 per year that it typically produced between 2007 and 2013. The good news is that WA’s economy has stabilised and there’s signs of better years ahead.
Adelaide on the up but Darwin on the down
Rising confidence levels in the Adelaide market was behind its recent uptick in building approvals, however it comes on the back of a deep trough in 2010 to 2013.
The (very low) Darwin housing supply story, on the other hand, was a sign of its continued woeful property market conditions. Darwin’s retraction in building approval volumes is reflective of a Top End recession that Propertyology has been concerned about for a few years.
Hobart and Canberra heating up
Dwelling approvals in the Tasmanian capital are on the rise however, the total volumes remain short of demand.
While the value of a typical property in metropolitan Hobart has (so far) increased by 50 per cent over the last 4 years, the housing under-supply continues to pressure on rents.
Hobart vacancy rates remain at an Australian capital city record all-time low.
The most recent population figures for the March 2018 quarter shows that Tasmania’s growth was the second largest ever on record, beaten only way back in June 1990.
Demand for housing in Canberra remains strong but, we do some have concern about the high proportion of units being built compared to houses.
Canberra is not as cosmopolitan as global cities like Sydney and Melbourne. The very large volume of apartments being constructed is more a reflection of Canberra’s demand for temporary residents while training at an academy or filling a government employment contract for a few years.
Regional supply snapshot
Outside of the capital cities, the housing supply pipeline was very much a mixed bag.
Strengthening local economies in many regional towns and cities, combined with a 78,000 national increase in regional population last year and affordable housing, means demand continues to rise.
Surplus housing stock from four to five years ago has largely been soaked up in locations such as Mudgee and Muswellbrook (NSW), Latrobe (Vic), Mackay and Rockhampton (Qld), Geraldton, Karratha and Mandurah (WA), Port Augusta, Whyalla and Port Pirie (SA).
The housing supply pipeline remained balanced in large parts of regional Australia, including:
|Alice Springs||Busselton||Mount Gambier|
|Ballarat||Coffs Harbour||Port Lincoln|
|Bundaberg||Margaret River||Wagga Wagga|
However, there were signs of potential oversupply in the next few years in other regional areas, including:
Propertyology is a national property market research firm and buyers agency. We help everyday people to invest in strategically-chosen locations all over Australia. The multi-award-winning firm’s success includes being 2018 winner of Buyers Agency of the Year in REIQ Awards For Excellence and a finalist in the 2017 Telstra Business Awards. Contact us here.