New laws to clamp down on Melbourne CBD’s skyscrapers won’t stop a predicted drop in prices of up to 20 per cent in the next three years, according to a property research house.
Strict new density regulations announced by Planning Minister Richard Wynne on Saturday that limit the height of future towers to 24 floors unless open space offsets are provided won’t stop a ‘correction’ for inner city apartment prices, said BIS Shrapnel managing director Robert Mellor.
Building approvals hit record highs under former Planning Minister Matthew Guy, dubbed Mr Skyscraper because of his aim to make Melbourne ‘the tallest skyline in Australia’, as property industry pundits warned of an oversupply.
These planning approvals were still coming through the pipeline and would keep adding to the apartment supply, Mr Mellor said.
‘This financial year we will reach an oversupply,’ he said. In the next financial year, 2016/2017 he said there would be a ‘significant excess’ of apartments. ‘Get out as soon as possible [otherwise] it will take 10 to 15 years before you get your money back.’ Paul Nugent, Wakelin Property Advisory
‘This will get worse in 2017/2018 and towards the end of 2018, when investors will start to struggle to get sufficient numbers of tenants,’ he said.e
Investors looking at buying in the market will see rising vacancy rates will few prospects of capital gains, while apartment owners will struggle to hold onto the apartments without tenants.
On the back of this, he said it’s ‘possible we’ll see a 15 to 20 per cent correction any time over the next year to 2018/2019????????????????????????.
Buyers’ agency Wakelin Property Advisory director Paul Nugent also expects a drop in prices of ‘at least 10 per cent’ that wouldn’t be softened by the new restrictions.
‘It’ll take a generation until things settle down to a point where the apartments have a genuine value,’ Mr Nugent said.
Smaller apartments in larger blocks with little natural light would be those hardest hit, while three-bedroom apartments with more generous floor plans might weather through, he said.
‘Get out as soon as possible [otherwise] it will take 10 to 15 years before you get your money back,’ he said.
Despite these warnings, Domain Group senior economist Andrew Wilson did not predict any significant drop in prices for inner city apartments.
He said offshore buyers are changing the investment dynamic in the inner city.
Where local buyers typically require decent levels of cash flow and a steady tenant, he said offshore buyers were ‘a whole new ball game’ and were more than happy to keep apartments vacant.
‘Our international investors aren’t as tuned in to finding a tenant,’ he said.