New forecasts from CBRE suggest that a notable disparity between the availability and demand for apartments in crucial city center markets will play a pivotal role in sustaining rental growth.
CBRE’s projections indicate that approximately 570,000 additional apartments will be required in the next three years across major Australian cities including Sydney, Melbourne, Brisbane, Perth, Adelaide, Canberra, and the Gold Coast.
This stands in contrast to the current annual national supply of around 55,000 apartments.
CBRE’s Pacific Head of Research Sameer Chopra noted that 75,000-80,000 apartments were needed in Sydney alone over the next three years, just to keep vacancy rates at current levels.
“The national mismatch between supply and demand is a key factor driving our rental growth forecasts,” Mr Chopra said.
“Our data also highlights that some precincts will see significantly larger population growth than others, with vacancy issues to be most acute in the major city centres and associated near city suburbs such as Waterloo and Pyrmont in Sydney, Carlton and Southbank in Melbourne, Fortitude Valley and New Farm in Brisbane, Subiaco in Perth and Campbell in Canberra.”
CBRE’s projections indicate a need for an additional 49,000 new apartments within these regions over the upcoming three years.
Furthermore, inner ring markets like Sydney’s Lower North Shore, Inner West, Inner East Melbourne, North Melbourne, and Inner Brisbane are anticipated to require another 43,000 apartments.
In precincts such as North Adelaide, Belconnen in Canberra, and Sydney’s Sutherland Shire, more moderate growth is expected. CBRE’s dataset covers 53 residential precincts throughout Australia. In the month of June, around two-thirds of these precincts experienced a year-on-year rent growth of over 10 per cent, while the remaining third witnessed a remarkable 20 per cent growth.
Notably, rents in inner city suburbs grew at a pace twice as fast as those in the outer ring suburbs.
“In most precincts around Australia we’re expecting 0.2 to 0.5 per cent apartment vacancy contraction in the next 12 months. This comes at a time when 80 per cent of precincts have a sub 1.5% vacancy and will be a key driver of future rental growth,” Mr Chopra noted.
“In some precincts such as Sydney’s Inner West, rents could inflate by as much as 30% on a cumulative basis over the next three years, as vacancy drops below 0.5 per cent.”
It comes after new survey from Resolve Strategic for The Sydney Morning Herald found that 48 per cent of voters back Minns’ policy to increase supply through more apartments in city suburbs.
NSW Premier Chris Minns recently said the state can accommodate more people.
“[But] we need to make sure that we’ve got balanced growth, more apartments and towers closer to where there are jobs and opportunity and existing public transport infrastructure.”