Experts are predicting that Melbourne is heading for a housing undersupply due to the increase in population.
Not enough houses being built to tackle Australian housing undersupply
Just this week, data released from the Australian Bureau of Statistics (ABS) illuminated the dire undersupply of housing currently besetting the nation. New figures show an unsettling lack of houses, especially where they are needed most — cities such as Melbourne (specifically Melbourne CBD), Sydney, Brisbane and Hobart, all home to impressive population growth rates, are expected to depend greatly on new residential constructions to meet high demand.
The ABS figures showed a 3.3 per cent decline in residential construction in trend terms, with the last quarter of 2017 recording a 0.7 per cent decline — such trends still occur despite population growth, immigration and interstate migration which continue to push Melbourne, Sydney, Brisbane and Hobart well into a more populous future!
AMP Capital’s Shane Oliver told The New Daily said that, for the most part, Australia was near equality in construction versus population growth, but that the last decade of construction had failed to keep up with Australia’s record population growth.
Housing Undersupply in the face of population growth
“If you look at Melbourne there’s 120,000 people moving to it per annum, but only 75,000 houses being built,” said Commsec Senior Economist Ryan Felsman, echoing Oliver’s observation.
The same concerns about Melbourne, specifically Melbourne CBD, have been heard before, the Urban Development Institute of Australia warned last year that the city could have a shortfall of 50,000 houses by 2020.
New-build apartments like the upcoming Palladium Tower in Southbank, are being constructed to address the severe lack of housing in Melbourne. Palladium Tower is strategically located in the Melbourne CBD area, right next to Fishermans Bend, Australia’s largest urban renewal project covering 485 hectares in the heart of Melbourne. By 2050, the area is expected to provide housing for up to 80,000 people, and employment for 40,000.
And yet, experts from BIS Oxford Economics who had gone on record to reverse its initial predictions about the surplus of apartments in the city centre, are stating that Melbourne is headed for an undersupply based on the increase in population.
If we zoom in on Melbourne’s astounding population growth, the shortage of houses will begin to hold even more weight. As of 2016, the estimated residential population in the municipality of the City of Melbourne was 151,176. This figure, when added to the colossal 903,000 people who were recorded to have travelled to or be present in the municipality on an average weekday, produces a whopping 7-digit figure the housing market is not currently prepared for.
Even more surprising is the population growth in Melbourne CBD. The district, which spans only 6.2 km^2, is expected to have a population of 76,982 in 2037, 44% higher than the population in 2017 — this growth forms 29% of the total projected population growth of the City of Melbourne within the same time frame!
To illustrate the critical undersupply in Melbourne, is a recent story of regarding a property developer, Tim Gurner, whose launch of rental apartments at 74 Eastern Road , South Melbourne, amassed a queue of people who snaked around the block to inspect the 47 newly completed units.
The Australian Financial Review Rich Lister said his 74 Eastern Road apartment development attracted more than 500 inquiries and 150 rental applications without a single advertisement. All the apartments were subsequently leased within a few hours.
“We have been absolutely blown away by the response to the first inspection, which we only advertised with a single sign board on the front facade. Half an hour before the inspection time we already had a line out the door and around the corner,” Mr Gurner told The Australian Financial Review.
Gurner closes his account by declaring that operations that further restrict housing supply, such as increasing taxes on new constructions, will only exacerbate the issue for the house-hunting population.
As expected, high demand for houses will continue to propel Australia’s property market forward. Melbourne, especially, Melbourne CBD, is expected to take the brunt of this undersupply following its high population growth rate.
By Nimue Wafiya
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