Apartment supply at record levels for Melbourne’s inner suburbs

A new report has revealed the key demographics driving demand in Melbourne’s inner-city apartment sector, confirming that the pipeline of new supply is at a record high.

BIS Shrapnel’s latest Inner Melbourne Apartments Market Brief predicts that most of the new apartment supply in the city’s inner suburbs will be absorbed by overseas investors, as domestic investors are put off by flat rent and price growth in the sector.

The brief reported that new apartment supply averaged 6,000 apartments per year in the four years to 2015-16, with over 24,000 apartments on track to be completed in the three years to 2018-19 – a record high.

Most of these will be absorbed by foreign investors, primarily from Asia, buoyed by low borrowing costs and a desire to invest in a more transparent and stable political environment, according to BIS Shrapnel.

The firm found that the inner city is particularly exposed to the investment market in comparison to the greater Melbourne area.

Of the current apartment stock in the inner Melbourne area, private rental apartments account for 58 per cent – compared to 25 per cent across greater Melbourne.

Owner-occupied dwellings represent 28 per cent of existing apartment stock.

Unoccupied dwellings – which BIS described as apartments “held as second homes or kept empty as speculative investments” – comprise 14 per cent of stock, a figure the company called “high”.

Furthermore, the report showed that the vast majority of rental demand comes from tenants aged between 20 and 29 years old, with this age group accounting for 52 per cent of rental households occupants.

Students account for 21 per cent of the inner-city apartment population, with overseas students making up 85 per cent of this figure.

Meanwhile, BIS said inner Melbourne’s apartment vacancy rate remains “relatively high” at 3.5 per cent, while median rents have shown “almost no change” over the last four years and median apartment prices are set to trend downwards in 2015-16.

[Related: Adelaide buyers flock to new developments]

promoted stories

REB Events