The recent Settlement Risk data from CoreLogic showed that the number of new units expected to be completed in the near future exceeds 90,000 a number that could lead to further weakening of both dwelling values and rents, especially in Sydney and Melbourne.
An additional 94,471 new units were reported to be finished across the nation over the next year, marking a 3.5% increase in total unit supply. Within the next two years, the unit supply uplift is anticipated to be much higher at 251,751 units, up 9.3% on current supply.
Going by the figures in each of the major capitals, which were referred to in the research as “Greater Capital City Statistical Areas (GCCSA),” it was not surprising to see that unit supplies will climb even higher.
Sydney (76,977) and Melbourne (78,689) were projected to register the greatest increase in unit supply over the next two years. While having much lower number of unit new units due for settlement, Brisbane and Adelaide were expected to record the greatest percentage increase in new unit supply, rising by 18.4% and 12.5%, respectively.
Moreover, insight on the top 25 Statistical Area Level 3 (SA3) regions was focused on these areas seeing greatest number of new unit settlements over the next two years.
“Brisbane Inner is expecting an additional 9,732 units over the next two years which translates to an increase in overall unit supply of 29.7%. Melbourne City is expected to see an 8.1% increase in unit supply over the next two years with an additional 8,040 units while Sydney Inner City is set to add an additional 7,202 units, an uplift of 6.1%,” CoreLogic noted in its report.
Looking closely, the top 25 list is dominated by Melbourne, which makes up 12 of the 25 regions mentioned. This was followed by Sydney, which accounts for nine spots, while Perth and Brisbane cover one and three slots, respectively.
Remarkably, Sydney’s supply of units is set to increase across geographically diverse areas along transport spines while most other cities will witness gains exclusively within inner city areas.
“Over the past five years we’ve seen a significant increase in overall unit supply. At the same time, housing market conditions have deteriorated over the past year, particularly in Sydney and Melbourne, with dwelling values falling and rental growth slowing,” research analyst Cameron Kusher said.
“Considering that dwelling values have generally trended lower over the past twelve months, buyers who have purchased a unit ‘off the plan’ may find the unit value at the time of settlement is lower than what they may have expected at the time of signing the contract. In some cases, the settlement value may be lower than the contract price; implying buyers may need to top up their deposit in order to meet their lenders loan to valuation requirements.”
