Contrary to the many reports of a housing shortage, a recently leaked report reveals there’s an oversupply being created in Melbourne’s sprawling fringe, with supply exceeding demand by thousands of homes. Meanwhile, there’s a huge undersupply of houses in established suburbs.
BY MICHAEL YARDNEY
?A recent article in Melbourne’s The Age newspaper, entitled ‘Home construction on urban fringe ‘excessive’’ written by Jason Dowling reported that:
??“According to The Melbourne Residential Market: Demand & Supply Overview, new housing developments on the city’s fringe are the only areas in Melbourne where building approvals outstrip demand, with a surplus of 4775 houses.
?“The October 2010 report says that despite a surplus of housing in the new greenfield developments, overall Melbourne has a housing shortfall of more than 6000 homes a year because of a shortage of housing in established suburbs.
?“The report highlights an overwhelming demand for ”family housing” and recommends that government policy encourage the building of more family-friendly townhouses in existing suburbs.
?“Overseas migration to Melbourne was the main factor driving housing under-supply, the report showed. It says that migration ”levels that exceed 56,000 persons per annum currently exceed the industry capacity to deliver new housing”.
?“Melbourne’s migrant intake rose sharply from 40,000 a year in 2006 to 83,000 a year in 2009 and has now dropped back to 63,000, according to the report.
?“Despite the finding of an oversupply of housing approvals on Melbourne’s fringe, the Baillieu government intends to release more land on the city’s fringe for new homes.”
??This report clearly highlights what I’ve been saying in these blogs for some time – the Melbourne property market (like all our capital city property markets) is fragmented and segmented.
?There’s an oversupply of properties in the outer suburbs and a looming oversupply in the inner CBD with too many off-the-plan projects in the pipeline. Yet at the same time there’s a shortage of properties in the inner established suburbs.
?This means that as a property investor you just can’t buy any property and hope it will increase in value. Now, more than ever, careful property selection is critical to ensure you don’t buy a dud investment.
?If you buy the type of property that’s in strong demand by owner occupiers, and has some elements of scarcity (such as restricted supply) and purchase it at the right price, you’re likely to have found yourself a good investment.
Michael Yardney is the director of Metropole Property Investment Strategists, a best-selling author and one of Australia’s leading experts in wealth creation through property. Subscribe to his e-magazine at www.propertyupdate.com.au. For more information about Michael visit www.metropole.com.au.