City apartment 'frenzy'
A ''FRENZY'' of apartment towers granted planning permission in one corner of Melbourne's CBD could squeeze thousands of new residents into four city blocks and change the character of the city.
The proposed concentration of developments - many of which include tiny one-bedroom apartments - could see Melbourne follow the lead of Asian cities such as Hong Kong for extreme density, according to a prominent planning academic.
Associate professor in environment and planning at RMIT, Michael Buxton, said: ''It's changing the character of the CBD that people love irrevocably and it's wrecking historic value.'' And property experts fear a glut of apartments could affect property values and rents.
Records from the Department of Planning show 7800 new apartments are proposed for a pocket to the city's west, bounded by La Trobe, William, Bourke and Spencer streets. The area is a microcosm of a citywide trend that began when the residential property market rebounded in 2010, on the back of strong population growth and government stimulus.
Within the Melbourne City Council area alone, about 52,000 new apartments in 201 residential developments are in the planning pipeline. However, researchers BIS Shrapnel, Charter Keck Cramer and ANZ have this year warned of an oversupply of apartments proposed in areas such as Southbank and the CBD that could cause property values and rents to fall.
The developments around King Street include Hong Kong developer Far East Consortium's Upper West Side project on the former power station site at 613-649 Lonsdale Street.
Construction has already begun on the first of four planned buildings of up to 176 metres that will have 2543 apartments, with ground-floor shops.
Another ''city within a city'' is planned across the road at the former Age site at 250 Spencer Street, which is being divided up between developers.
Almost 4000 apartments have been proposed for the site, with Southbank developer Central Equity already gaining planning approval for two towers.
Chinese developer Hengyi Australia has started construction of The William at 199 Little William Street, where 547 apartments are planned to be complete by early 2014.
While history shows many projects never get built, some experts predict the market will hit a record oversupply by 2014.
BIS Shrapnel senior manager Angie Zigomanis said it was ''the greatest concentration of new apartment development or potential for new apartment development'' recorded.
He said there would be a cascading effect through the market as CBD landlords find they have little to no capital growth for several years and have to discount rents to attract tenants.
Mr Zigomanis said this would dampen rents and property values in secondary locations, such as Northcote, Brunswick and Preston, which are also seeing an explosion in new apartments.
Professor Buxton, described the trend as a ''frenzy'' that threatened the viability of Melbourne's apartment market.
He said sizes of just 55 square metres for a one-bedroom apartment were common in overseas cities like Hong Kong, but new for Melbourne.
''The attitude of the approval authorities is, the more construction the better. It's a classic boom and bust mentality,'' Mr Buxton said.
''The government sees cranes on the skyline as indicators of progress, jobs and investment but there just is no oversighting of whether this is good for Melbourne, the danger it represents for small investors and the viability of the apartment market.''
Planning Minister Matthew Guy said Mr Buxton's comments were bordering on the offensive.
''The targeting of Chinese developers based on their ethnicity should be of concern to all Victorians,'' Mr Guy said. ''As usual, Mr Buxton's views are reflective of a zero-growth mentality.''
While many of the planned apartments around King Street will be marketed to offshore investors and financiers, some will never get the money to go ahead. Other landholders in the area will on-sell their sites with new permits, without any construction taking place, a common speculative industry strategy.
This will likely be the case for land behind a historic brick building at 640 Bourke Street, between King and Spencer streets. Australia Post, headed by former NAB chief Ahmed Fahour, has lodged an application that would include 560 apartments and just 249 car park bays.
It has tried to sell it four times, but would have more luck selling the site if it obtains a permit.
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