Inner Melbourne Apartment Market Update

Greater Melbourne’s preferred indicator of selling activity in the property market is Auction Results. Last week’s clearance rates were 75%, up from 72% the weekend prior and 67% this weekend last year. There were 833 auctions reported to the REIV with 627 selling and 206 being passed in, 99 of those on a vendor bid. So far this year, there have been 26% more homes sold at auction than last year – the highest in six years. The average clearance rate is 72% which is also a healthy outcome in comparison to 67% this time last year.

In the CBD, sale by private treaty is recommended over auction as the preferred method of sale. In general, it is a simple exercise to determine the market price for an apartment in an inner city residential tower due to many comparative sales of similar apartments within a building. In the last three months, there have been 621 properties sold in Melbourne CBD compared to 576 this time last year- up 8% from last year.

Whilst there is a growing supply of apartments within Melbourne CBD, rental demand continues to be strong. Melbourne CBD is still one of the first places that new residents to Melbourne look to live. Melcorp’s property management portfolio is growing yearly and runs at an average of a 1% vacancy rate.

Whilst there are comments in the general media about the over supply of city apartments, what is often overlooked is the future demand estimates for additional residences in Melbourne CBD due to population growth models. The number of dwellings in the City of Melbourne is forecast to grow from 56,863 to 70,894 in 2020 with a population increase from 121,058 to 148,323. With an average of 1.98 people per household, by 2020, Melbourne CBD will require an additional 13,770 properties, and then beyond 2020 through to 2036 where it is projected that there will be 103,634 households, a further 32,740 properties will be required.*

*Population and household forecasts, 2011 to 2036, prepared by .id The population experts, February 2014.