Is Melbourne’s housing boom set to end?
Melbourne has been one of Australia's best-performing property markets, but a new report suggests this won't last.
Melbourne has been one of the good news stories for the Australian property market of late, leading the nation in dwelling value growth year-on-year. But the city's run of good fortune may be coming to an end if one property analysis firm is to believed.
A new report from Propertyology argues that Melbourne could share the same fate as Perth, where oversupply saw strong dwelling value growth collapse. The report has claimed the housing supply pipeline in Melbourne is exceeding demand by 12,000 dwellings per year.
According to Propertyology, Census reports indicate the underlying demand for additional housing over the last two years would be 70,207 dwellings. By contrast, housing approvals in the Greater Melbourne area over the last two financial years have totalled 107,381. Moreover, 56% of the dwellings constructed over the last four years have been apartments, up 35% from the 10 year average.
"Melbourne City is on track to approving 19,000 CBD apartments over the last three years; this is an increase of 158% on the annual average from the previous five years. The Melbourne LGA population growth is just shy of 6,000 people per annum and equates to demand for 3,000 extra dwellings compare to the recent average annual supply of 6,300 CBD dwellings," the report said.
A factor potentially exacerbating the problem could be concerns over the city's manufacturing industry, Propertyology said. The Greater Melbourne area's manufacturing sector employs 197,705 people. With planned closures of motor vehicle manufacturing plants, Propertyology said Melbourne could see job losses comparable to those in Perth following the wind-down of the resources boom. The report cited a University of Adelaide study that forecast up to 98,000 job losses directly and indirectly from car manufacturing closures.
"Ninety-eight thousand jobs equates to more than 5% of the city's total workforce," the report said.