Unit glut turns to drought as apartment projects ditched by developers

The Australian 12:23pm March 27, 2019

Mackenzie Scott

The apartment glut may quickly dry up as the number of deferred and abandoned developments rose 168 per cent last year, with Australia’s peak development body warning of a broader “imminent cliff-fall in future supply” across capital city housing markets.

New data from the Urban Development Institute of Australia (UDIA) State of the Land report shows kinks in the pipeline are being felt in all capital city markets. Last year, 168,580 projects were deferred or abandoned compared to just 62,880 in 2017, an increase of 168 per cent. However, it is the number of unit abandonment in capital cities that grew most notably, up 400 per cent from 22,000 units in December 2017 to over 110,000 in December 2018.

UDIA national president Darren Cooper said the number of projects being abandoned or stalling placed the market in a position where it will struggle to meet underlying demand moving forward.

 “This rapid drop off puts the industry at risk, which contributes $202.9 billion to the economy annually and supports the employment of more than 1.43 million workers, further putting their livelihoods at risk,” he said.

“With market dynamics different between the capital cities, housing supply relationships and solutions are complex and require a co-ordinated government and industry response.

“We call on all political parties to make the provision of housing, underpinned by appropriate and timely infrastructure a key priority.”

Melbourne has felt the biggest impact, with project deferments and abandonments up 496 per cent over the last months compared to 2017, while Sydney was also up 110 per cent. In the smaller markets, Adelaide followed with a deferments and abandonments 400 per cent increase, Brisbane rose 121 per cent and Perth went up 59 per cent.

The data is another headache for property developers. Sydney and Melbourne unit markets are currently under pressure, with developers dealing with falling prices, tighter lending and uncertainty around the approaching federal election. However, in the medium turn, the pendulum is likely to swing the other way, with sharp declines in the projects leading to greater supply problems and shortages.