• The residential vacancy rate for the Inner-City precinct was 3.9%, its lowest level since June 2020;
• Inner Melbourne apartment rents continue to show signs of recovery, having increased by 5.0% over the year;
• Currently there are 7,300 apartments under construction within the Inner-City Melbourne region with 47% of the apartments are located in the CBD Core, followed by 18% in Docklands.

Inner-City Melbourne Apartment Summary

The residential vacancy rate for the Inner-City precinct decreased to 3.9%, its lowest level since June 2020. Boosted by the declining vacancy rate, Inner Melbourne apartment rents continue to show signs of recovery. Having peaked at $460/week as at February 2020, Inner Melbourne apartment rents now average $430/week as at June 2022.

Prices

Inner-City apartment values appear to have peaked for the short term with apartment prices having remained stable over June 2022 quarter. While prices have fallen over the year, over the June 2022 quarter, Inner-City Melbourne median apartment prices were steady at $570,000 according to the REIV. Potentially reflecting the changing preferences of purchasers for more space and scarcity of product, 3-bedroom apartments in the Inner-City precinct recorded the strongest annual growth, increasing by 7% to $1,155,000. In contrast, 1-bedroom apartment values fell by 3.2% over the year to $395,000. 2-bedroom Inner-City Melbourne apartment values increased by 3.1% over the 12 months to June 2022 to $662,000. With values having generally increased over the past two years, with the combination of declining new apartment pipeline and return of international students, Urban Property expects that values of Inner-City Melbourne apartments will remain steady for the medium term despite the likely interest rate rises supported by growing rental rates.

Supply

Currently there are 7,300 apartments under construction within the Inner-City Melbourne region. Over 2021, 4,600 apartments were completed in the Inner-City Melbourne, 26% above the 20-year average. Urban Property Australia research forecasts that 4,400 apartments will be completed this year, before falling to 1,900 in 2023. Of the 38 new developments currently under construction, 47% of the apartments are located in the CBD Core, followed by 18% in Docklands and 11% are located in Southbank. Looking ahead, while there are a further 26,700 apartments with plans approved in the Inner-City Melbourne region, Urban Property Australia’s research forecasts that the supply pipeline has peaked in the short term. New apartment supply in the Inner-City Melbourne precinct are projected to remain below the 20-year average for the next five years.

Inner Melbourne New Apartment Supply

Demand

Despite the substantial decline in occupancy, employment and international student levels in the Inner-City precinct, transaction activity for apartments in the region is on track to record an above-average level. Transactional volumes for apartments in the Inner-City Melbourne precinct have totalled 2,500 in 2022 to date, boosted by increasing investor interest. Looking ahead, Urban Property Australia’s research forecasts that the transactional activity of the Inner-City apartment market will continue to improve, albeit remain below the 10-year average as investor demand gathers momentum.

Vacancy

According to the REIV, as at June 2022, the residential vacancy rate for the Inner-City precinct (0-4km radius of the GPO) was 3.9%, its lowest level since June 2020. While vacancy rate has trended down since the peak of 9.0% in March 2021 (an all-time high) the current level remains significantly above the 10-year average of 3.3%. Looking ahead, Urban Property forecasts that the vacancy rates for the Inner Melbourne precinct will continue to fall as employment in the CBD picks up and international students return but is likely to remain above the long-term average through 2022.

Rents

Inner Melbourne apartment rents continue to show signs of recovery. Having peaked at $460/week as at February 2020, Inner Melbourne apartment rents now average $430/week as at June 2022 according to the REIV, having increased by 5.0% over the year. Urban Property Australia forecasts that although Inner Melbourne rents seem to have stabilised, demand would have to markedly lift to underpin rental growth and pre-COVID highs unlikely to be surpassed until 2023.

Inner Melbourne Residential Vacant & Rents

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