Economic and Victorian Property Market Review & Outlook – July 2018

Despite global and Australian economic conditions growing at their fastest pace for many years, the Australian property market faces a number of headwinds, impacted by tightened lending conditions and more restrictive foreign investment policies.

While the Melbourne residential market has been resilient so far, there are emerging signs of the market softening; with prices easing, falling transactional volume and declining investor activity.

Within the Inner Melbourne apartment market specifically, the development cycle appears to have peaked for the medium term with the pipeline of new supply impacted by tighter lending conditions and weakening foreign investment.

Victoria’s office markets are Australia’s best performing office markets. The vacancy rate of the Melbourne CBD is the lowest of all Australian CBDs having fallen to its lowest level since 2008. Elsewhere the St Kilda Road and City Fringe office markets recorded rental growth in excess of 20% over the year as occupiers’ battle to attract the next generation of employees.

Buoyed by robust leasing activity and declining vacancy levels, Melbourne industrial rents grew solidly across Melbourne’s industrial precincts. Increased infrastructure spending in Victoria and strong population growth will continue to underpin industrial tenant demand.

Victorian retail investment activity is on track to achieve record highs in 2018, with already $1.1 billion sold in 2018 to date. Despite soft retail trade conditions, there continues to be demand from major both domestic and offshore institutions to acquire trophy retail assets in Victoria.

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