Inner-Melbourne apartment completions reached a peak last year, and to date, negative side effects on the market have been minimal, according to JLL’s Australia Melbourne Apartment Market Commentary 4Q17.
While price growth accelerated significantly in the third quarter of 2017 and vacancy rates fell on an annual basis, JLL anticipates that resales and price growth will continue to come under pressure in areas where completions have been concentrated.
“Strong population growth continues to drive overall dwelling demand,” the report said. “Inner Melbourne project commencements and planning submissions were limited throughout 2017 resulting in the size of the overall supply pipeline decreasing.”
Approximately 10,600 apartments were completed in Inner Melbourne throughout 2017, with 72% of these completions occurring in the Melbourne City precinct. A further 8,800 apartments are under construction in this precinct.
Despite the high volume of completions last year, Greater Melbourne apartment prices grew 4% year over year in the third quarter.
“Market indicators suggest that the Melbourne market is handling the apartment supply peak relatively well,” the report said. “Despite a drop-off in investors, strong population growth continues to bolster overall dwelling demand. This has been reflected by a pick-up in price growth and continued low vacancy.
“Overall, development activity in the inner-city appears to be slowing down. Significantly less apartments are under construction compared to 4Q16. Securing development finance remains the key issue in proceeding projects to construction. Fewer planning submissions and the withdrawal of projects for alternate uses has also reduced the overall pipeline.”
Mark Wizel, national director at CBRE, forecasts continued growth and a strong outlook for the Melbourne apartment market.
“Melbourne’s apartment market is the strongest in Australia, driven by lifestyle and standard of living factors that have seen the city listed as the world‘s most liveable,” he told Your Investment Property.
“With Sydney’s cost of living so much higher, we are even seeing positive interstate migration on top of overseas migration and natural population growth. [Hence] the outlook for the Melbourne apartment market is very good, particularly in inner to middle eastern suburbs such as Box Hill, Glen Waverley, and Abbotsford, and for boutique projects generally.”
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