iBuyNew Group Limited CEO Mark Mendel warned that Melbourne is at risk of experiencing an apartment shortage. The capital is expected to face a surge in demands for new apartments because of its rapidly growing population that is set to reach eight million. It will become the first city in Australia with that much number of residents.
Property Observer quoted Mendel in its report as saying that a lot of the apartments in the pipeline will not push through. Many of the developers whose building proposals have been approved would not proceed with the development of their apartment towers. When this happens, the approval rates will become inflated and make it more difficult to predict the actual number of apartments that would rise within Melbourne.
Mendel also contradicted the claims of other industry experts that Melbourne would encounter an oversupply. The supply glut is expected to be brought on by the good number of residential apartments that are in the works. Let’s take, for example, the data provided by the Commonwealth Bank of Australia. According to the report, about 140,000 proposals to construct residential apartments in Melbourne were approved. However, only 35,000, of which, are scheduled to be completed by 2018. Given that, it would be impossible for the city to see an oversupply in the coming years. The number of completed buildings in the coming years would not even reach half the total number of approved building proposals. This is particularly true among larger and top quality towers. Mendel added that the city needs to produce a good amount of residences if it wishes to retain its title as the world’s most livable city based on the Economist Intelligence Unit’s survey.
Tim Gurner, who is the boss of the luxury property development company Gurner, voiced out similar worries last year. In a report by Broker News, Gurner stressed that the existence of soaring demand for apartments in the capital. His company had a complete picture of the growing interest among the locals after the launch of two of their apartments in December 2016. During the public sale, Gurner received more than 450 expressions of interests from interested buyers. The response was much higher than expected as they only forecasted about 20 or 30 prospective tenants during that time. He also recommitted to his previous stance for the past 18 months that Melbourne has a shortage of apartments.
Meanwhile, industry experts said Melbourne is unlikely to experience oversupply in 2017. They also concurred that the sector is bound to face scantiness in the number of apartments because of the failure of many developments to get off the ground, according to Realestate.com.au. A lot of developers acquired permits. However, only a few of them have actual plans of building them. This was supported by the data released by CBRE wherein only 543 projects out of the 4148 approved proposals have started their development. In addition to that, Beller Project Marketing Associate Director Heath Thompson warned that the impending shortage could also be made much worse as developers follow a trend of merging smaller units to come up with bigger residences. This practice took place at Forza Capital’s Supply Co. in Richmond wherein the number of planned apartments dropped to a meager 130 units.