The study, by national property market researcher Propertyology, found that Melbourne is on the cusp of a market downturn.
The report predicts that the slump will be caused by the untimely collision of thousands of job losses in manufacturing with entrenched oversupply issues.
“Propertyology believes that the 2016 supply-demand fundamentals for greater Melbourne resemble those of Perth in 2014,” Propertyology market analyst Simon Pressley said.
“The housing supply pipeline exceeds population demand in Melbourne to the tune of approximately 12,000 dwellings per year,” Mr Pressley said.
“Of even bigger concern is the impact on as much as six per cent of the city’s households from car manufacturing plant closures from late 2016 and continuing through 2017. One would have to anticipate there’d be a significant knock-on effect to consumer and business confidence across the entire city.”
The research highlighted that Melbourne’s oversupply problem extends beyond the inner-city apartment market. According to the report, sixteen of greater Melbourne’s 31 local government areas (LGAs) have approved 50 per cent more dwellings than normal, even though the population growth rate has remained the same.
“Melbourne city is on track to approving 19,000 CBD apartments over the past three years; this is an increase of 158 per cent on the annual average from the previous five years,” Mr Pressley said.
“The Melbourne LGA population growth is just shy of 6,000 people per annum and equates to demand for 3,000 extra dwellings, compared to the recent average annual supply of 6,300 CBD dwellings,” he said.
However, the report found that the main factor in the market downturn will be the loss of jobs from 2014 to 2017 in the manufacturing plants of Ford, Holden and Toyota.
Mr Pressley pointed to a University of Adelaide study on the impact of the closures on Australia, which predicted huge job losses, with Victoria the state most adversely affected.
“The study states that ‘Australia is expected to suffer a fall in national employment of around 200,000 as a result of the planned closure to motor vehicle manufacturing between [mid-2014] and 2017’,” he said.
“The greatest impact in terms of projected job losses will be in Victoria, with an estimated decline of close to 100,000 jobs. Victoria’s gross regional product is also forecast to decline by $13 billion per year.
“Big events like this affect the mood of an entire city, as extended family and friends express their concern for those they know who have been directly affected.”
Mr Pressley predicted that Victoria may have the highest unemployment rate in the country by the end of 2017, which will further negatively impact its property market from 2017 to 2018.
“Sales volumes will fall; days on market will increase, as will vacancy rates,” he said.
“Confidence will diminish, as will buyer competition. Property prices across Melbourne, and not just inner-city apartments, are likely to reduce, as will rents.”
Mr Pressley said he sees “a stark resemblance” between Melbourne’s current fundamentals and those of Perth in 2014.
“Propertyology correctly forecast the resultant easing of demand in Perth and rising housing supply that left the legacy of a five per cent decline in Perth property values during 2015 – and we feel more of the same is likely there in 2016.”