Inner Melbourne Residential Apartment Market in 2013
February 1st 2013 | , City of Melbourne
It appears that sentiment for residential property has shifted, with median dwelling prices seemingly bottoming in the final quarter of 2012
Affordability will continue to aid the recovery of the residential sector but prices are unlikely to rebound significantly over the next 12 months.
Investor lending finance levels have risen recently, boosted by purchasers looking to acquire property through their self-managed super funds (SMSF). Improved investor yields on residential property, low vacancy rates and the prospect of a sustained (structural) increase in rents should steadily attract investors (domestic and overseas) back into the residential property market.
The current pipeline of new supply in the Inner Melbourne precinct remains of particular concern and may lead to some price declines in secondary developments in particular. The pipeline of construction work underway sits at record levels, well above the long term annual average of 2,300 per annum. In 2012, there were 2,450 apartments completed, while this year a further 5,800 apartments are scheduled for completion – the highest annual completion level on record for the Inner Melbourne precinct.
The strong influx of new apartment supply over recent years in the Inner Melbourne region is now also beginning to impact on vacancy levels. The Real Estate Institute of Victoria recorded a vacancy level of 4.6 percent in the Inner Melbourne precinct compared to the broader Metropolitan Melbourne vacancy rate of 3.6 percent as at January 2013. Inner Melbourne’s vacancy rate has now reached its highest rate since November 2005.
This wave of new supply is likely to have a cascading effect through other locations. With the likelihood of little to no capital growth for several years with investors having to discount rents to attract tenants to CBD apartments, with rents and values in fringe locations such as Northcote and Brunswick also at risk.
Inner Melbourne Apartments Supply 2002-2015