Article: Housing glut hits suburbs

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Housing glut hits suburbs

Housing glut hits suburbs
July 8, 2012

MELBOURNE'S urban fringe has been swamped with 35,000 unsold homes, prompting warnings the glut could trigger a further slump in property values, and fuelling criticism of the Baillieu government's ''crazy'' decision to expand the city's boundary.

The stockpile of unwanted housing in many of Melbourne's newest suburbs has led to warnings by some planning experts that ''suburban ghettos'' could emerge on the city's fringe, creating a social divide.

Of the record 55,290 unsold homes in Melbourne in June - the highest number of any capital city in Australia - most were concentrated in about 50 suburbs on Melbourne's periphery, where more than 60 per cent of all unsold homes in Victoria are located, according to data from SQM Research.

As demand has fallen over the past year, the number of outer suburban homes with ''For Sale'' signs has jumped by almost 40 per cent.

Factors thought to be driving the surge in home listings include mortgage stress, poor infrastructure and transport services in outer-lying areas and limited local job opportunities.

''We are now building suburbs that are destined to fail and ensnaring people in an economic trap,'' RMIT planning expert Professor Michael Buxton said.

In the western suburbs of Truganina, Hoppers Crossing and Tarneit, more than 4000 homes are on the market - a 54 per cent jump in sales listings on the same time last year.

About 3700 homes remain unsold in the outer-northern suburbs of Doreen and Mernda, most in new estates built over the past decade.

''We're just not seeing any end in sight to this glut of new supply coming into the market,'' said SQM Research managing director Louis Christopher. ''It seems obvious there is only one direction for prices. That's a frightening possibility if you're a property owner.''

Even in established outer suburbs such as Epping, Caroline Springs and Deer Park, 2000 homes remain unsold.

''It's like a ghost town in the new developments. Nothing has moved for the past three, four, five, six months,'' said Hocking Stuart agent John Halkidis, who works in northern suburbs including Bundoora and Epping.

The tough market conditions are expected to deteriorate even further, with research showing developers are poised to release another 75,000 new home sites at 126 existing housing estates in the city's growth areas.

''In good times, that would be equivalent to a five-year supply. Right now, it's more like a nine-year supply,'' said Robert Papaleo, research director for property analysts Charter Keck Cramer.

According to the group, Melbourne already had a 30-year supply of land before a decision last month by Planning Minister Matthew Guy to shift the Urban Growth Boundary - the fourth time it had been moved since 2002, when it was created to stem urban sprawl. The contentious move benefited several landowners who had donated to the Liberal Party.

Mr Guy said the recent release of more land for subdivision, which equates to about 65,000 new housing lots, would improve Melbourne's liveability and housing affordability.

But Professor Buxton accused successive governments of bowing to pressure from powerful lobby groups, including the Housing Industry Association (HIA) and the Urban Development Institute of Australia (UDIA).

''This has been a very fraudulent campaign, which is proven by the huge overhang of unsold properties,'' he said. ''We already have 30 years of land supply on the fringes, so why would any rational government expand it by another 6000 hectares? It's crazy stuff.''

The outer suburbs were usually the first and worst areas affected by an economic downturn, said Professor Buxton: ''We are designing the world's worst suburbs, the housing stock is terrible and they have very poor liveability. We are going down the same path as the US, where areas outside major cities have become suburban ghettos.''

Marcus Spiller, a former president of the Planning Institute of Australia, warns a glut of land and unsold homes would contribute to social dislocation and resentment in the outer suburbs.

''This is a troubling scenario of a city divided. We will wind up with two Melbournes, one that is prosperous and well served with infrastructure and employment opportunities, versus a second one on the fringes which is dislocated with property prices that are far less buoyant,'' Dr Spiller said.

The government had no ''credible strategy'' to stimulate employment growth or provide public transport and schools in outer suburbs, he said.

But claims of a housing glut were rejected by development industry groups, the UDIA and the HIA.

''There's no reason for concern. The stock on the market tells you nothing about the fundamentals. It's underlying demand that matters. Melbourne's new homes market is in good shape,'' said HIA economist Andrew Harvey.

Read more: http://www.theage.com.au/victoria/housing-glut-hits-suburbs-20120707-21o6k.html