In the last month, the media has been reporting on both the looming apartment oversupply and shortage. So are there really too many units, or is an apartment shortage ahead? Let’s look at the facts.
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a number of developments are currently being abandoned or delayed
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reports from late last year show there were just 35 Sydney suburbs with an oversupply. There are 658 suburbs in Sydney!
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SQM Research’s latest report indicated that Labor’s proposed negative gearing changes will raise rents and decrease prices – leading to an eventual update in housing sales and thus shortages
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A January report indicated that there was a drop of 44 percent in NSW housing approvals
New reports suggest a Sydney apartment shortage ahead
Recently, The Australian also reported that a drop off in projects will result in a shortage soon. Reports that indicate that too many apartments will be on the market soon are not necessarily correct. As a result of projects being stalled or abandoned (even downsized) we are already seeing an increase in unemployment in construction, and “activity in apartment construction has fallen for 11 months in a row to its lowest point in six years — a time when the industry was still recovering from the GFC” (from news.com.au)
Some developers are delaying builds or abandoning them altogether
Luke Mackintosh of EY Property Advisory has stated in the media that a large number of buyers are millennials who will be entering the market in a couple of years: “We have 50 per cent of the population that are under 35; 35 per cent of millennials still live with their parents. The oldest of the millennials are turning 35 this year. They are the buyers’ market. They are the market that developers will be selling into.”
Urbis have recently released a report on the apartment market that has been well summarised in this article from architectureanddesign.com.au.
From the original report:
“We need to keep an eye on supply levels as ongoing population growth, particularly on the east coast, will quickly take up available supply. This may result in a housing supply shortage in the next 12 to 18 months as we are also seeing fewer completions in the greenfield house and land market.”
You can read the Urbis report here.
So whilst we’re not talking about the Sydney housing crisis of 2016 here, there are indications we could be seeing shortages occur when the market does pick up.
