2020 Undersupply makes 2018 rife with development potential


Economists at Bank of America-Merill Lynch have predicted a real estate undersupply in less than two years – despite any potential oversupply from the large volume of apartments hitting the market this year.


Corelogic data shows a drop in dwelling values across six of eight Australian capital cities – a result of housing price moderation caused by new properties hitting the market. This is because building approvals peaked in 2015 and now, after the three-year average build time, a bulk of new developments are nearing completion.


The three-year average build time means many developments approved in 2015 will be finalised in 2018 and 2019. The worry has been that an oversupply would negatively impact the market and profits leading into the coming decade.


These concerns of oversupply have afflicted developers and owners in major property markets – but moderating prices, rising rates and increased construction costs are expected to cause this profusion of opportunity to reverse by 2020. Population growth also factors in to demand, as today’s abundance becomes tomorrow’s scarcity.

The analysis is a relief for developers and owners whose bottom line would be affected by oversupply.


What’s next for Melbourne’s market

Although property prices have moderated, values in Melbourne have increased by a fifth since 2015. This should maintain off-the-plan valuation despite price moderation forecasted in the next 18-24 months.

The market is a dynamic environment for investment, but one thing is clear – 2018 is rife with potential for development. Securing a site now will position your property as a point of much-needed relief in a period of undersupply in the early 2020’s when it is completed.

With extensive development site experience including a record-breaking residential-to-development deal closed last year, Melcorp Commercial is well-positioned to assist you in capitalising on the next decade’s predicted undersupply.


Source: The Australian Financial Review




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