Despite recording a dramatic upswing in the number of property developments, Victoria shows little signs of succumbing to an oversupply issue.
Speaking at the Business Forecasting Conference last week, BIS Shrapnel managing director Robert Mellor said while some parts of Victoria may run into minor oversupply conditions, over the longer term, oversupply will not be an issue.
“Built on the back of strong underlying demand and solid population growth, the Melbourne market will be able to sustain the boom in development for the next two to three years,” Mr Mellor said.
According to the Mr Mellor, dwelling commencements rose by 30 per cent in 2009/10 to 54,500 starts – Victoria’s highest level of construction to date.
Private and other dwelling commencements also increased in 2009/10, growing 43 per cent.
Relatively low land prices were the driving factor behind Victoria’s recent residential development boom.
However recent price hikes are expected to cool the construction boom by at least seven per cent over the next 12 months.
Mr Mellor said this adjustment will prevent the market entering oversupply in the future.