A significant mismatch between apartment supply and demand will help drive continued rental growth in key city centre markets.
New CBRE forecasts estimate that an incremental 570,000 apartments are needed over the next three years across Sydney, Melbourne, Brisbane, Perth, Adelaide, Canberra and the Gold Coast, versus the current national supply of about 55,000 apartments per annum.
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,” 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 is forecasting demand for a further 49,000 new apartments in these precincts over the next three years, with a further 43,000 apartments required in inner ring markets such as Sydney’s Lower North Shore and Inner West, Inner East Melbourne, North Melbourne and Inner Brisbane.
More moderate growth is anticipated in precincts such as North Adelaide, Belconnen in Canberra and Sydney’s Sutherland Shire.
CBRE’s data tracks 53 residential precincts across Australia. In June, two-thirds of these precincts recorded +10% year-on-year rent growth and one-third 3rd saw +20% growth, with inner city suburb rents growing at double the pace of outer ring suburbs.
“In most precincts around Australia we’re expecting 0.2% to 0.5% apartment vacancy contraction in the next 12 months. This comes at a time when 80% of precincts have a sub 1.5% vacancy and will be a key driver of future rental growth,” 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%.”