Are we facing an apartment oversupply?

Are we facing an apartment oversupply?

In today’s show Angie Zigomanis from BIS Shrapnel flags that there is an oversupply of units in the Melbourne market already, with 1000’s more scheduled.


Kevin:  There’s an article in the latest edition of Australian Property Investor magazine that takes a look at what’s available in off-the-plan sales in the capital cities around Australia, and also what you should be looking at and maybe what you shouldn’t be.
On the strength of that article, Australian Property Investor magazine asked me to do an interview with one of the people quoted in that article about some of the pitfalls, what you should be looking for, and in particular, whether or not there is an oversupply in the Melbourne market.
You can listen to that full interview and, in fact, that podcast, which is available now on the API featured channel at But I thought now, I’d share just a little bit of that conversation with you – the conversation that I had with BIS Shrapnel’s Angie Zigomanis specifically about the Melbourne market.
Angie, how bad is the situation in Melbourne?
Angie:  At the moment, we think vacancy rates are only slightly elevated. There’s been a surge in new apartment construction, and over the last two years, there’s been about 6000 apartments completed annually in inner Melbourne on average, compared to a long-term average of about 2500, so we’re talking about a substantial increase.
Vacancy rates are edging up, but really the issue is in the current pipeline of apartments that are being constructed. We estimate, on average, over the next three years, another 6000 or so apartments per annum will be completed on top of the last two years, which means that the vacancy rates will continue to increase, and that will place pressure on rents.
Kevin:  Are there any areas of Melbourne that you’re more concerned about than others?
Angie:  We’re most concerned about the central Melbourne areas – the CBD, Southbank, Docklands, and perhaps a few suburbs fringing those suburbs, as well.
When you look at anyone who has purchased an off-the-plan apartment in the last two years, the majority, if they were to sell today, would probably sell at a lower price than they purchased it at.
Part of that is because a lot of the stamp duty savings etc. are built in to the purchase price, and anyone who’s buying an established apartment afterwards has to pay stamp duty on their dwelling, so that effectively gets built into the resale price, and so the resale price is slightly lower.
But anyone who does purchase an apartment now after taking into account all the purchase costs, I suspect probably will have definitely recorded a loss in most cases.
Kevin:  In that conversation with Angie, we cover a lot more detail. We talk about whether or not you’re better off holding back and waiting to buy units at the end after they’ve been completed, what are the features in a unit block that are going to minimize the impact of oversupply, any advice that he has – and he has a lot of it, too – for anyone contemplating buying off the plan, particularly in Victoria, and whether or not you’re better off having a valuation done before you agree to buy.
Look, there’s a lot in that chat that I had with Angie. You can hear the full podcast right now by going to the API featured channel at

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