There has been constant media speculation about an oversupply in the Melbourne residential market for some time. Led by record numbers of new dwelling approvals over the past decade, predominantly in the form of medium and high density apartment developments, Melbourne is undergoing a significant transformation as new supply comes to market. But is this added supply excessive, or simply meeting record demand?
Firstly, Melbourne's population has grown exponentially. Over the year to June 2016, Melbourne's population grew by 107,770. These people need a place to live. Over the same time, 56,486 new dwellings received building approval, which will add to the dwelling supply over the coming years. With no drastic changes to migration patterns and a constant natural population increase, we believe that Melbourne is adequately meeting strong demand with sufficiently high levels of supply.
Secondly, to claim Melbourne's apartment market is oversupplied is implying that the whole metropolitan city is a single market. Each suburb operates uniquely, with further sub markets within each. For example, a first home-buyer in the market for a $500,000 CBD apartment is not in the same market as a family looking for a $5,000,000 house in Toorak. Even within a given development there are often different markets. A $10,000,000 penthouse is a unique market to the $400,000 apartment on the bottom floor of the same project.
District Data believes it is far too simplistic to say Melbourne, as a whole, is oversupplied. There are certain sub markets, within particular suburbs that we believe are experiencing excessive supply at the moment. Despite this, we see opportunity in many sub markets across the city that possess the key fundamentals to continue to attract demand and justify the need for added supply. It is therefore crucial that policy makers, urban planners and property developers alike take a considered approach and do their due diligence to ensure Melbourne remains the world's most liveable city well into the future.
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