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Australia 'faces oversupply of ...

Australia 'faces oversupply of homes in 2017'

Australia will have an excess supply of residential property next year, according to a new study by BIS Shrapnel.

The research firm's 2016 Building Industry Prospects report, which was released today (March 10th), revealed that after ten years of having fewer homes than needed, there will be 24,000 too many next year.

BIS Shrapnel's managing director Robert Mellor said: "We are moving into a period where by June 2017, every capital city will have some oversupply other than Sydney."

While Victoria will have 22,000 too many homes, New South Wales will still be short by over 41,000, although that is an improvement on the 2016 projection of 53,000. This gap is unlikely to be closed until 2020 unless construction rates increase, he said.

By contrast, Mr Mellor said Melbourne will have a serious excess of new-build apartments and the situation could be even worse in Brisbane.

Associate director at BIS Kim Hawtrey said: "Vacancy rates are heading back towards three per cent, price increases around the country are pretty subdued and unlikely to be dramatic going forward."

The varied situation means anyone investing in Australian property will need to consider carefully which cities they choose to buy in. Cities with an oversupply may offer lower prices, but less prospect of good returns on any sale in the near future. In addition, locations such as Melbourne have seen little increase in rental rates, whereas this market is likely to see more inflation in places like Sydney due to the fact that first-time buyers have fewer options.

Experts have said they expect Melbourne's market to be cooler than Sydney's, not least because in the Victorian capital prices in the outer suburbs are substantially lower than in most outer Sydney neighbourhoods.

The report noted that most of the new building in every state has been concentrated on the construction of new apartments in the major cities.

All information provided is of a general nature only and does not take into account your personal financial circumstances or objectives. Before making a decision on the basis of this material, you need to consider, with or without the assistance of a financial adviser, whether the material is appropriate in light of your individual needs and circumstances. This information does not constitute a recommendation to invest in or take out any of the products or services provided by SMATS Services (Australia) Pty Ltd or Australasian Taxation Services Pty Ltd.

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