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Melbourne faces oversupply

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Melbourne may soon be facing a situation of oversupply, according to new data from SQM Research.

The rising vacancy rate recorded in Melbourne, a 1 per cent increase last month, has seen more than 16,007 rental prThe rising vacancy rate recorded in Melbourne has seen more than 16,007 properties empty and more may be on the horizonoperties empty.

“Melbourne is looking ominous and we are expecting rental declines for this capital city for 2012,” said Louis Christopher, managing director of SQM Research.

“Melbourne has definitely become a renter’s market and landlords can no longer be expected to extract higher rents in Melbourne,” he said.

Late last year, Mr Christopher said that Melbourne had reached an equilibrium and was at a tipping point with vacancy rates at 3 per cent.

“It is very possible we will see Melbourne vacancies continue to rise from here as there is, even at this point in time, new stock still just being completed now,” he said.

In December 2010 there were 12,937 vacancies recorded.

The current 4.4 per cent vacancy rate is a six-year high and is being treated as “ominous” by the research body, who still point to upcoming developments that are currently in the completion stages.

Victoria-based Becton Property Group's CEO for development and construction Damian Dalgleish, however, explained to Smart Property Investment that he sees no chance of an oversupply provided the unemployment rate remains low.

“That oversupply word is thrown about a bit. How can there possibly be an oversupply?

“I can’t see, in the foreseeable future, while our unemployment rates remain where they are, that we will have any particular problem with oversupply,” said Mr Dalgleish.

He explains that investors are still in the market and many young professionals have expressed interest in renting or buying his latest developments.

“It’s that phenomena of when you get to 21 and you finish your university degree and you want to rent. In this country people earn good money and can afford to go and rent with a couple of people.”

He says that he knows that many developments are still in the pipeline but that it is not an indication that the market faces an oversaturation.

“There are a lot of places still in construction today, but I can see that there might actually be a further undersupply coming up as we go forward because once that is delivered I think there is still a bit of a hole [in the market].”

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