Thousands of approved Melbourne apartments are yet to start construction, with some now being cancelled by developers. Picture: Valeriu Campan.
Thousands of Melbourne apartments have been abandoned or heavily delayed in a blow to the Victorian government’s hopes to build its way out of a housing crisis.
Families who have been waiting years for their next home are now having contracts torn up as the state’s development woes worsen.
Surging building costs and Daniel Andrews-era policy decisions have combined to turn huge numbers of the state’s apartment pipeline into “phantom approvals”, with Victoria now ranked as one of the worst places to build units.
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Australian Bureau of Statistics data analysis shows one in six apartments approved for construction around the nation have still not been commenced two years later, with experts warning it is significantly worse in Victoria.
By contrast more than 95 per cent of houses approved are built, as are similar numbers of townhouses.
MCG Quantity Surveyors research shows that home completions in Victoria are on track to reach about 56,000 in 2025, which is 10,000 (15 per cent) below the state’s peak of 66,000 in 2017.
It is significantly short of the 76,000 annual home build target to meet obligations under the National Housing Accord’s 1.2 million home target by 2029, and even worse when contrasted with the state government’s own 80,000 homes a year goal for the next decade.
Daniel Andrews-era policies are being blamed for Victoria’s struggling new apartment sector that has thousands of homes in limbo. Photo: Asanka Ratnayake/Getty Images.
Australia’s planned tallest tower, STHBNK By Beulah, is among those facing an uncertain future after a prolonged sales period and huge increases in building costs.
MCG Quantity Surveyors director Mike Mortlock said the data showed far fewer homes were being built than officials citing approvals data were claiming.
“We need unit construction to be outperforming targets. The reality is the opposite,” Mr Mortlock said.
Their figures show Melbourne’s south east has a less than two month supply of new apartments, while there is just over three months’ supply headed to the Mornington Peninsula, followed by the city’s inner east where there is an about four-month supply of units.
Mr Mortlock said there were multiple “headwinds” to unit construction that were not as prevalent only a few years ago, a key one was that “governments at all levels have become drunk on property taxes”.
Housing Association Industry chief economist Tim Reardon said many of the multi-unit projects approved in Sydney, Melbourne, Brisbane and other big city markets were “phantom approvals”.
Apartments worth as much as $35m in what was planned to be Australia’s tallest tower are among those in uncertain territory.
HIA chief economist Tim Reardon is among the experts warning soaring tax bills, especially for international investors, have hammered apartment construction. Picture: Tertius Pickard.
“For apartment building to increase meaningfully, we would need to wait for established units to become so scarce that the prices would catch up with those for new units,” Mr Reardon said. “It could take years.”
He noted that a key contributor to phantom approvals issue was increased taxes on foreign investment into new housing projects, with Daniel Andrews the first premier to increase stamp duty on internationals in 2015.
“These taxes are the goose that killed the golden egg,” Mr Reardon said. “It’s one of the worst housing policy own goals. Removing the taxes would see significant increases in the homes getting built.”
A number of major Victorian projects have suffered as a result of international investment taxation as well as rising building costs.
Developer Caydon’s collapse has left the final elements of its redevelopment of the Nylex Clock site in Cremorne, dubbed the Malt District, in an unclear situation.
Imagery showing early proposals for the site have not all come to be.
Buyers who have splashed as much as $35m on homes in 2022 for what was planned to be Australia’s tallest skyscraper, STHBNK By Beulah, are now in limbo after the project manager BSSPV Pty Ltd was placed in voluntary administration in February.
While it has since exited administration, the site is still waiting on the outcome of an expressions of interest with developer Beulah International looking to either sell the site or establish a joint venture for its continued development.
Aspects of the Malt District redevelopment of the Nylex Clock site in Cremorne also remain undeveloped, years after its developer, Caydon, collapsed.
In Alphington, Glenvill’s YarraBend stopped sales for a development titled the Glass House as the cost of building soared, and while most buyers took back their deposit in the years that followed the building’s launch to sales in 2022, one couple finally had their contract torn up in March this year.
“We stopped sales when we found out where building prices were headed,” said Glenvill sales and marketing director Sam Tucker.
The YarraBend development in Alphington has progressed in many facets, however its planned Glass House complex has been axed. Picture: David Caird
The Glass House was intended to be one element of the development’s Boiler House precinct, but is now back in front of planners as rising costs changed what was feasible for the site.
Mr Tucker added that the Glass House was being redesigned and going back through council planning and would be included as part of its Boiler House complex, with apartment sizes and formats to be revised – including the removal of most one-bedroom offerings which had become far more difficult to sell with prices touching on $700,000 due to building cost increases.
Glenvill have been able to continue with other developments within the wider YarraBend infill project and a separate complex with close to 200 homes is due to reach settlement in the near future.
Conveyancer Andrew Curtis worked with a number of buyers affected by the project’s cancellation and said he was seeing a rise in the number of people buying off-the-plan apartments only to have their contract rescinded years later.
“The vast majority of developers, you don’t run into these sort of problems; and a lot of this was impacted by Covid,” Mr Curtis said.
“But the issue is becoming more common.
“And it is going to get worse. The building costs are still ridiculous and that’s still causing a lot of issues for builders in the industry.”
A tower planned for 280 Queen St, Melbourne, was approved years ago but is yet to be built.
A highly stylised design for 175-187 Sturt St, Southbank, is also on the list of sites approved years ago that has yet to be built.
In many instances, the conveyancer said stalled or abandoned developments would likely have gone ahead if not for the Daniel Andrews-era policy increase to stamp duty for international investors.
“One of the reasons these projects are running into trouble is that they aren’t selling to offshore investors,” Mr Curtis said.
Charter Keck Cramer national executive director of research Richard Temlett said building costs had increased by 30-50 per cent, adding hundreds of thousands of dollars to the cost of many projects, with the state’s tax regime also a major factor in development woes.
“Rather than tax at 5 per cent and nothing gets built, if they taxed at 2.5 per cent and 10 times the number of homes get built, they would at lease get some revenue,” Mr Temlett said.
“Melbourne is the weakest apartment market right now, because of the loss of overseas revenue. And that’s one of the biggest missteps the government has made and we are now seeing it.
“It’s all things lingering from the Andrews era.”
A substantial tower planned to rise above 696-708 Elizabeth St, Melbourne, has also yet to be built.
He noted buyers looking for certainty in the apartment sector could still look for well-funded groups and those with a listing on the Australian Stock Exchange as a way to find groups more likely to be able to proceed with projects in a timely way.
Australian Property Development Association president Alex Huang said Victoria had become “probably one of the worst places that a developer can pick to launch a project”.
Over the past year he said he was hearing of contracts being torn up “more and more frequently”, estimating 100s of would have been rescinded, though he was optimistic falling interest rates would help to improve the situation for the sector in the year ahead.
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