Half of new apartments built and bought by offshore investors: industry expert

26 May 2016

The Age, 26 May 2016

By Clay Lucas

Half of central Melbourne's new apartments are being built and bought by off-shore investors, as the city grapples with what one development industry figure has labelled an "unprecedented level of supply".

And he warned that a slowdown in the property market meant it was harder to sell apartments, and tougher for developers to get a final settlement out of buyers.

It has led a prominent housing academic to question whether the city's apartment boom was being driven by investors who needed a high-end product to park money rather than addressing housing affordability.

Next year alone, 20,000 apartments will be completed across Melbourne, property industry researcher Robert Papaleo said.

Speaking at a Property Council forum on Thursday, Mr Papaleo, a director of researchers Charter Keck Cramer, said Melbourne's central city would see almost 6000 new apartments ready for occupation next year.

In 2004, Mr Papaleo said, "at the peak of when we heard about Docklands oversupply every day in the newspapers, Melbourne as a city was delivering 6000 apartments" a year. This was for all of metropolitan Melbourne, not just the central city alone.

The current glut continues despite a slowdown in recent months as some buyers found it difficult to get banks to lend them the final balance to settle their off-the-plan purchases. Fairfax Media this week revealed Macquarie Bank recently hit the brakes on lending for high-rise towers in up to 120 postcodes nationwide.

Mr Papaleo shied away from describing Melbourne's apartment market as oversupplied, but said there had been a "palpable" change in sentiment as developers discovered how tough it was to sell projects.

Charter Keck Cramer's research for the final half of 2015 found that 47 per cent of development in Melbourne's central city was by offshore developers, and it was being largely bought by overseas buyers.

Mr Papaleo said a new class of global investor willing to buy in Australia was behind the boom in apartments in Melbourne's CBD.

Melbourne University housing expert Kate Shaw said these investors were "generating enormous upward pressure on prices".

"Much of the increase in central city housing supply is high-end investment product – not housing that meets local demand," Dr Shaw, an urban geographer, said. "How much of this investment stock is fully occupied? Most research suggests very little."

Dr Shaw said new inner city apartments were failing simultaneously on three fronts: they were not making housing more affordable, not meeting local housing needs, and not curbing urban sprawl. "So why exactly are we building them?" she asked.

This was disputed by Property Council acting Victorian executive director Asher Judah. He said Dr Shaw's comments were "more anti-development politics than evidence based reality".

"A very large proportion of new apartment stock [is] affordable and desirable for local buyers," he said.

The Property Council event was held to discuss new laws introduced by Planning Minister Richard Wynne to rein in the density of developments being built in central Melbourne in recent years.

The government has introduced interim laws that demand developers wanting who built to the boundaries of their site can only go up to 18 levels.

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