As construction costs put a halt on some apartment projects, a new report says a supply shortage in Sydney, Melbourne and Brisbane will become more acute and push prices upwards.
According to Charter Keck Cramer’s most recent six-monthly reports, the number of commencements for build-to-sell apartments in Sydney, Brisbane, and Melbourne in the year to June fell to the lowest level in each city in a decade indicating a reduced supply as demand heats up again.
According to the consultancy’s State of the Market H1 2022 report, Sydney apartment commencements decreased to 7700 in the most recent fiscal year, down from the 2017 peak of 31,000.
According to the study, Melbourne had 5900 new apartment starts last year, down from 24,300 in 2015.
The difference in Brisbane was likewise apparent, with just 1900 commencements last year, a fraction of the 13,300 of the peak year in 2016.
The report noted that this lack of supply is likely to push prices upwards.
“As several projects will no longer proceed in the short term, it is anticipated that the current supply shortage will become even more acute over the next two years,” the report said.
“This has the potential to cause rents to increase further given the existing shortage of supply of rental dwellings and ultimately translate into increased prices of new apartments.”
On the build-to-rent front, there are approximately 772 apartments in two projects at the approved stage in metropolitan Sydney with both located in the Middle Region.
There are over 2,750 apartments in nine projects at the Application or Mooted stages across metropolitan Sydney. They are all located in the Middle, City Fringe and Inner Regions of metropolitan Sydney.
There were 495 apartments in two projects completed in FY 2022 in the Central City Region of Melbourne and 73 apartments in a further project completed in FY 2022 in the City Fringe Region.
In Brisbane, there were 200 apartments in one project completed in FY 2020 in the Central City Region (which has been sold in one line to an international BtR operator and is now operating) and 89 apartments in a further project completed in FY 2022 in the City Fringe Region.