Excessive New Constructions will Strain Apartment Demand in 2019

The highest level of newer constructions will continue to put strain demands for apartments in 2019 as well. As per reports, property developers are going to add new 337,000 apartment units this year, up from 320,000 which they did in the year 2018! With hundreds of thousands of new luxury units coming up this year, it is bound to add pressure on the apartment sector. Most of the new apartments delivered in 2018 were found to be renters. Similarly, percentages of apartments which will likely be occupied this year are likely to fall. Even though occupancy may slightly backtrack, it will still prove to be healthy for performance of current occupancy is strong.

Real Estate Developers May Slow Down a Bit

There may be another giant wave of fresh luxury apartments with new ideas to hit the apartment market across the country this year; Especially within Central Business Districts (CBDs) & downtown areas of prominent cities. Competition may be a little easier for landlords to handle than what they had to do last year. Construction delays may be a hindrance for developers for what they had initially planned. Assuming delays in delivery continue at the rate seen in recent years, the competition will be stiff like it was in the last year.

Long Term Outlook for the Apartment Sector

With lessons learnt, long term outlook for the luxury apartment sector is likely to improve this year as developers will start on fewer units. Fewer starters will also mean there will be fewer delays. However, some experts in the real estate industry also warn that developers may be able to complete their building plans on time & subsequently push for more new apartments onto the market. This is because developers initially will start construction on fewer new apartments & in the short term, low volume of new construction will translate into few construction delays.

Completions to Rebound in 2019

In such a scenario, completions are bound to rebound this year. Length of time for completion will start to flatten as construction starts would slow down. Anyway, strain on the luxury apartment sector will remain relatively high this year. The Construction industry will still remain robust this year before completions will drop off next year. Metro cities will showcase bigger increases in a number of luxury apartments this year. Cities which will show some amount of decrease will be Class 1 & Class 2 cities.

Strong Demand to Continue

Nevertheless, the strong demand for luxury apartments will continue to help fill up new units. Present residents will help developers fill new apartments, but maybe not as fast as it was possible in prior years. However, without employment & wage growth we were not able to roll out a healthy number in 2018 & this may continue this year if we fail to improve the situation.

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