Job losses, oversupply to hurt Melbourne property prices from 2017: research
Car manufacturing job losses and oversupply of houses and apartments are expected to hit property prices in Melbourne from 2017, according to new research.
The study, by property market researcher Propertyology, found that Melbourne is on the cusp of a market downturn. The report says the slump will be caused by the untimely collision of thousands of job losses in manufacturing with entrenched oversupply issues.
"Propertyology believes that the 2016 supply-demand fundamentals for Greater Melbourne resemble those of Perth’s in 2014," said Propertyology market analyst Simon Pressley.
"The housing supply pipeline exceeds population demand in Melbourne to the tune of approximately 12,000 dwellings per year.
"Of even bigger concern is the impact on as much as six per cent of the city’s households from car manufacturing plant closures from late-2016 and continuing through 2017. One would have to anticipate there’d be a significant knock-on effect to consumer and business confidence across the entire city."
The report says the main factor in the market downturn will be the loss of jobs from 2014 to 2017 in the manufacturing plants of Ford, Holden and Toyota.
And it is not just the apartment sector that is burdened by oversupply. Sixteen of Greater Melbourne’s 31 local government areas (LGAs) have approved 50 per cent more dwellings than normal, even though the population growth rate has remained the same. The apartment sector also remains bloated by oversupply, the report says.
"Melbourne City is on track to approving 19,000 CBD apartments over the past three years; this is an increase of 158 per cent on the annual average from the previous five years," Pressley says.
"The Melbourne LGA population growth is just shy of 6,000 people per annum and equates to demand for 3,000 extra dwellings compared to the recent average annual supply of 6,300 CBD dwellings."
Pressley says a University of Adelaide study into the impact of the closures on Australia predicted huge job losses, with Victoria being the worst hit.
"The study states that 'Australia is expected to suffer a fall in national employment of around 200,000 as a result of the planned closure to motor vehicle manufacturing between (mid-2014) and 2017'," he says.
"The greatest impact in terms of projected job losses will be in Victoria, with an estimated decline of close to 100,000 jobs. Victoria’s Gross Regional Product is also forecast to decline by $13 billion per year."
Pressley says Victoria may have the highest unemployment rate in the country by the end of 2017, which will further negatively impact its property market from 2017 to 2018.
"Sales volumes will fall, days on market will increase, as will vacancy rates," Pressley says.
Property prices across Melbourne, and not just inner-city apartments, are likely to reduce as will rents, he said.
"I believe there is a stark resemblance between Melbourne’s current fundamentals and those of Perth’s in 2014. Propertyology correctly forecast the resultant easing of demand in Perth and rising housing supply that left the legacy of a five per cent decline in Perth property values during 2015 – and we feel more of the same is likely there in 2016."
