Units are about to go on a tear-away
The Financial Review was running a story last week under the headline: “Apartment rents to rise 13pc as supply shortfall widens”.
Given we know rents, and particularly unit rents in recent months, have been on a tear away, I thought it was interesting that somebody thought apartment rents would rip higher still.
That somebody was CBRE – a property analytics company:
A severe shortage of apartment rental supply could lift rents by another 13 per cent in some inner city districts next year as demand rises further, CBRE analysis shows.
An estimated 570,000 apartments are needed over the next three years across Australia’s capital cities, however, only 55,000 apartments are currently being built each year, according to Sameer Chopra, CBRE’s Pacific head of research.
“This significant mismatch between apartment supply and demand will help drive continued rental growth in key city centre areas, despite signs of easing in some rental markets,” Mr Chopra said.
Rental demand is expected to climb by 34,100 across Sydney next year, fuelled by strong population growth, but only 15,300 apartments are available, resulting in a shortfall of 18,800 units, according to CBRE’s estimates.
In Melbourne, the rental market will be short by 23,800 apartments, Brisbane by 12,100, Perth by 10,500 and Adelaide by 4100.
“Some precincts will see significantly larger population growth than others, with vacancy issues to be most acute in the inner city major city centres and associated near city suburbs,” Mr Chopra said.
It makes you wonder where the breaking point is.
Units, and high-rise units in particular, are supposed to be your entry-level housing option.
But what happens when you slap another 10% on top of the 20-30% we’ve just had? What happens when there are just no affordable options anywhere?
And the analysis is right. There’s a chronic shortage of units right now. Corelogic’s unit vacancy rate data has plummeted to just 1.0%. That’s incredibly low and lower than it is for detached housing.
And there is little hope of new supply coming on-line anytime soon. Apartment construction approvals have tanked back to 2012 levels.
And that’s happening at a time when immigration is still roaring back, juicing demand. As Corelogic’s research director Tim Lawless says:
“It’s fair to say demand for rental housing is likely to remain high as overseas migration, foreign students and domestic renters compete for scarce rental supply, and we are yet to see any material uplift in rental supply.”
It’s been a rough couple of years for investors in inner-city high-rise. Looks like their fortunes are about to turn.
JG.
Francis Meria says
Very good insights into the property market, opens the eyes to opportunities available in the real estate market.