New-apartment glut to push down rents by: Sarah Danckert
MELBOURNE'S apartment rental market is headed for a five-year period of oversupply as the number of units being built outstrips demand from tenants, new research has found. A flurry of development in inner Melbourne will see the number of new apartments added to the city's rental market each year nearly double over the next three years, economic forecaster BIS Shrapnel has found.
"The pipeline of construction in inner Melbourne points to record levels of supply," BIS Shrapnel senior manager Angie Zigomanis said.
The Australian recently revealed vacancy rates on both new and established apartments in inner Melbourne would rise to a worrying 10 per cent from the end of next year as thousands of new apartments under construction become available for rent.
From next year, BIS Shrapnel is forecasting the average number of new rental apartments completed each year will rise to 2800. This compares with the 10-year average of 1600 new rental apartments completed annually and a forecast tenant demand of 1500. Mr Zigomanis said the record levels of new apartment supply in inner Melbourne over the next few years would push the market into oversupply. Vacancy rates in inner Melbourne are now between 3 and 5 per cent.
..."The high level of competing stock means that landlords will be unable to command the premiums that are traditionally available for new apartments, while owners of older established apartments will have to discount the asking rent on their apartments in order to compete," he said.
The lure of high rents and rising population figures had resulted in a flood of investors purchasing off-the-plan in inner Melbourne in recent years, Mr Zigomanis said.
It would take until the end of 2016 before the number of people looking to rent an apartment in inner Melbourne caught up with the number of rental apartments available, BIS Shrapnel found.
In Sydney, the number of new apartments available for rent is also expected to rise. However, that supply was likely to be met with strong demand, Mr Zigomanis said.
