The latest JLL Apartment Market Report landed this week. Written by Senior Director, Leigh Warner and Senior Analyst, Hollee Hart, it showed some very interesting findings on the apartment market in each capital city.
It highlighted the escalating construction costs nationally and confirmed new apartment completions in Melbourne will drop by more than half after 2021 and remain flat through to 2025. So far this year, an amazing 81% of all Melbourne completions have been in the city precinct (this includes CBD, Docklands, Southbank and St Kilda Rd).
2021 is likely to see about 6,500 apartments completed in Melbourne but the pipeline of new apartments drops to around 3,000 p.a. in following years with a swing towards smaller projects targeting owner occupiers and particularly downsizers.
It takes about 3 to 4 years for an apartment project to go through design, town planning, presales, funding and construction, meaning there is a long delay from market demand to deliving supply. The imminent fall in supply from 2022 will almost certainly see upward pressure on values through 2023-2026 before supply can start to deliver new apartments meeting that demand in 2026 onwards.
The escalating construction costs is due to the surge in demand for trades (labour) and materials plus the closure of State and National boarders limiting the flow of skilled, unskilled as well as seasonal migrant workers to Australia. These cost hikes will futher retard new apartment construction starts.
Read the full report here.