28 July, 2013

Melbourne's Housing Stock - Boom or Bust

Victoria and especially Melbourne imports much yet produces little that the rest of the world chooses to buy. It hasn't always been so but as our manufacturing base moves offshore, we have increasingly relied upon the building and construction industry for our economic growth.

We have been opening up land for development, built more and more houses to settle in ever more people who migrate to Australia who also plan to live well and import much while exporting little.

Over the last year or so our Minister for Planning has been approving far too many apartment towers in the inner areas of Melbourne which is likely to result in an oversupply of small apartments that will be hard to sell or rent. So what is the outlook for our housing market ? While some commentators argue that we could be headed for a housing price crash in Melbourne, Monash University's Bob Birrell says that "those planning Melbourne's future have not come to grips with the causes of Melbourne's housing affordability crisis. The provision of even more high-rise apartment blocks or further extension of the Urban Growth Boundary will not provide a solution".

Recently the introduction of the Metropolitan Planning Strategy has suggested that we investigate putting more emphasis on regional development and unlocking the unused capacity of our middle and inner suburbs. While regionalization might be part of the solution the introduction of reformed zones for our suburbs, which is aimed to protect them from opportunistic infill, will make "unlocking" them for more housing densification impossible.

One of the drawbacks for apartments is that construction costs for larger apartments is prohibitive making them unaffordable for the family market. Most coming on line are less than 70 square metres (many are just 45 or 50 Sq. mtrs) which are mostly purchased off-the-plan by investors,with many marketed to overseas investors. It is becoming clear that we are building too many smaller apartments and the trend is towards even smaller apartments of low standard. 
(see the post below).

Labor's Melbourne 2030 plan was a failure and has been scrapped but the proposed Metropolitan Planning Strategy (MPS)which is to replace M2030 is also doomed to fail unless the Minister and his planners start thinking outside the square. 

We suggest a good start would be to reduce our immigration numbers and drastically cut back the massive visa programs (that are subject far too much manipulation) and thus reduce demand.

For more on this subject refer to the attached article from Michael Yardney which appeared in a recent Melbourne Property Buyers Agent's publication.

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