Analysts see a cause for optimism in Victoria’s troubled housing market as predictions of an oversupply of Melbourne housing stock appear to be less dire than originally anticipated.
“The talk 12 months ago was that there was going to be a huge oversupply coming, particularly with apartments, in 2013,” says Perron King of Herron Todd White. “But we are now finding that a lot of those projects aren’t getting off the ground – either they haven’t been able to secure enough presales or they haven’t been able to secure finance.
“It appears from where we are sitting now that the demand and supply is much more even than anticipated,” he says.
King also says the interest in a prominent new apartment tower in the CBD, Zen Apartments, has shown that there is still an appetite for quality apartments. “It was well received by renters as well as occupiers who bought off-the-plan, with 427 apartments now all sold.”
Strong population numbers
Recent population demand has also been seen as a strong driver, with the latest Australian Bureau of Statistics data indicating that Melbourne had the largest influx of new residents of all capital cities over the year through June 2011.
Furthermore, the Melbourne area city of Wyndham, which incorporates Point Cook and Truganina, is now officially the quickest growing city in Australia, posting a jump of almost 8%. Other municipalities on Melbourne’s fringe – including Melton, Cardinia and Whittlesea – were also listed among the fastest-growing areas across Australia.
But Michael Yardney of Metropole Property Strategists warns that the market may not be out of the woods just yet. “We can expect there will be an oversupply of inner-CBD and near- CBD apartments in Melbourne for a few years, causing prices to fall slightly,” he says.
Yardney adds that even as this happens, some pockets of the market are showing improvement. “There is an increase in demand for properties, particularly in the middle end of the market.”
King agrees, saying that interest in the $550,000–$750,000 bracket seems to be quite healthy throughout the inner suburbs and that there is also a marginal increase in activity in the bracket above that.
“In general terms, this year is completely different to the previous year, buyer confidence has picked up marginally. It’s almost like last year they were sitting back and waiting and this year they are actually doing,” King says.
“Yes, there is still a lot of stock available, but the properties that tick all the boxes are still competitive. What we are finding is that you are probably having three or four people bidding at auction compared to one to two last year.”
FHOG debate
In the midst of these signs of renewed hope for tightening housing supply, a debate has broken out among industry advocates about using the First Home Owner Grant to stimulate new building.
While all Victorian first homebuyers receive up to $7,000 for a home, they currently get an extra $13,000 if they purchase a newly constructed dwelling. The Real Estate Institute of Victoria believes that this additional payment for new homebuyers should be scrapped as early as next month because it has achieved its goal of stimulating building projects.
On the other hand, the builders advocate group Urban Development Institute of Australia says the Victorian first homebuyers grant should be restricted solely to newly constructed houses in order to stimulate more building.
“Whilst we still have population demand as a positive driver of the market, it needs to be complemented with the first homebuyer grant for new housing and the interest rate cut,” UDIA Victoria executive director Tony De Domenico said in a statement.
King also weighed in on the debate. “I think they are just trying to supplement the building industry. Purchasers, particularly out in the new western suburban estates, are purchasing dwellings that are two or three years old, which for them is more affordable than paying the premium for a new house and land package.”
King believes that restricting the FHOG to new homes would only hinder a new home purchaser’s ability to be able to afford the home they really want.
