The inner Melbourne apartment market is heading toward oversupply, while inner Sydney apartment vacancy rate is expected to stay low, according to BIS Shrapnel.
Angie Zigomanis, BIS Shrapnel senior manager, says new apartment commencements have picked up significantly in both inner Sydney and inner Melbourne since lows during the GFC.
“The pipeline of construction in inner Melbourne points to record levels of supply, while activity in inner Sydney is also coming to recent highs,” says Zigomanis.
BIS Shrapnel’s Inner Melbourne Apartments 2012 to 2019 report says rental apartment completions in Melbourne are forecast to increase from 1800 in 2011/12, to an average of 2800 per annum over 2013/14 to 2015/16. The 10-year historical average is 1600 rental apartments completed annually. The report says tenant demand over the period is forecast at 1500 per annum.
“The record levels of new apartment supply in inner Melbourne over 2013/14 to 2015/16 will push the market into oversupply and vacancy rates will rise,” says Zigomanis.
The Inner Sydney Apartments 2012 to 2019 report says around 2000 rental apartments are forecast to be completed in inner Sydney in 2013/14, which is similar to its 2003/04 peak and below the 1999/2000 peak of 2500 apartments.
The report says this will not be sufficient to erode the pent up rental demand in the inner Sydney apartment market.
Despite further high construction over the following two years, BIS Shrapnel forecasts a ‘modest deficiency’ of apartments in inner Sydney through to 2016.