A significant mismatch between apartment supply and demand will help drive continued rental growth in key city centre markets, according to new CBRE forecasts. CBRE’s data tracks 53 residential precincts across Australia.
CBRE estimates that 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 c.55,000 apartments per year.
75,000 to 80,000 apartments are needed in Sydney alone over the next three years, according to CBRE’s Pacific Head of Research, just to keep vacancy rates at current levels.
“The national mismatch between supply and demand is a key factor driving our rental growth forecasts. 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.
“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. 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%.”
Sameer Chopra, Pacific Head of Research, CBRE
CBRE is forecasting demand for a further 49,000 new apartments in these precincts, 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. In June, two-thirds of these precincts recorded +10% year-on-year rent growth and one-third saw +20% growth, with inner city suburb rents growing at double the pace of outer ring suburbs.
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