Inner Melbourne Apartment Market Mid 2017

Between 2001 and 2016, 16,400 apartments were added to the City of Melbourne, increasing stock by 52% over the period. Looking ahead, currently there are 16,800 apartments under construction and forecast to be completed by the end of 2020 within the Inner Melbourne region.

Development

According to the recently released Australian Census 2016 results, the residential population of the City of Melbourne increased from 93,617 people as at 2011 to 135,969 people as at 2016, an increase of 45%, far exceeding previous population forecasts. Previous population projections indicated that the population within the City of Melbourne would increase to 181,325 by 2031. In order to accommodate that population growth it was forecast that a further 40,400 households would have been required. These population projections are expected to revised significantly higher now in light of the Census 2016 results.

According to the Census 2016 results, there are 66,737 residential dwellings in the City of Melbourne, of which 71% are residential apartments. Between 2001 and 2016, 16,400 apartments were added to the City of Melbourne, increasing the stock by 52% over the period. Residential apartment growth over the five years to 2016 was concentrated in the CBD (6,800 new dwellings), Southbank (3,100) and Docklands and Carlton (2,000 each).

Currently there are 16,800 apartments under construction within the Inner Melbourne region. Looking ahead, there are further 55,000 apartments that are mooted (both applications and approvals) with plans for development in the Inner Melbourne region.

Of the 64 new developments currently under construction, 47% of the apartments are located in the CBD Core, followed by 21% in Southbank and interestingly 9% are located in the Carlton precinct (overtaking the Docklands).

Inner Melbourne Apartment New Supply

Demand

The Foreign Investment Review Board (FIRB) Annual Report for 2015/16 was released on May 2017. According to the report, the FIRB approved a total of $247.9 billion worth of proposed investments across all industry sectors that fall within the scope of Australia’s Foreign Investment Policy. Residential (at $72.4 billion) and commercial (at $49.7 billion) property represented 49.2% of all proposed foreign investment in 2015/16. Growth was recorded at 26% over the year to reach a total of $122.1 billion. Continuing to drill down into the property sector, approvals for Chinese nationals to purchase Australian residential and commercial property tallied $31.9 billion in 2015-16.

According to the Census 2016 results, the Inner Melbourne precinct is a relatively young residential population with the average age of residents at 28 years, with more than half (54%) aged 20 to 34 years – a result strongly influenced by the large cohort of international and domestic higher education students.

Immigration into the Inner Melbourne precinct continues at a substantial rate with the Asian nations China, Malaysia and India accounting for 25% of all residents according to the latest ABS census data. The number of Chinese-born residents living in the City of Melbourne grew the greatest over the five years to 2016, increasing by 13,918 people.

Somewhat surprisingly, the current vacancy levels of the Inner Melbourne precinct is only 2.2% as at May 2017, having fallen from 3.8% recorded in May 2016, despite the record levels of stock added to the precinct over the last two years. The relative constrained levels of vacancy may reflect that the majority of the recently completed apartments are held by offshore investors who are not offering the dwellings for rent.

Total Value of Property Approvals by Country

Median Prices & Rents

Apartment values in the Inner Melbourne region experienced growth of 3.2% over the year to the March 2017 quarter, reaching $587,000. Inner Melbourne apartment rental levels increased by 5% over the year to May 2017 with a median weekly rent of rising to $430, higher than the metropolitan average of $400 per week which increased slightly over the year. Interestingly, apartment values in the Inner Melbourne region experienced only a marginal increase of 0.4% over the March 2017 quarter which may reflect the impact of the cautious consumer environment.

The unprecedented level of completions within the Inner Melbourne precinct is likely to lead to an increase in vacancy, regardless if much of the recent completions remain held by offshore investors. As a result of boosted number of completions, capital growth for several years is likely to be restrained with boutique developments in fringe locations increasingly popular with owner occupiers and renters.

 

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