Q2 2024 – Melbourne Apartment Market
July 29th 2024 | , Urban Property Australia
- Values of Inner-City apartments increased by 0.5% over the year to June 2024, outperforming the broader metropolitan apartment market, but fell over the June quarter;
- Transactional activity for apartments in the Inner-City region remains relatively lively with almost 3,000 sales recorded over the first half of 2024, above the half-year average;
- Over 2024, Urban Property Australia research projects the second lowest level of new Inner-City apartments delivered to the Melbourne market in 10 years with 2,400 new apartments forecast to be completed.
Inner-City Melbourne Apartment Summary
Inner Melbourne apartment rents have reached all-time high levels in June 2024, having increased by 10% over the year. Over the year to June 2024, average rents for all sized-bedroom apartments in the Inner-City precinct rose by at least 8%, somewhat surprisingly led by 3-bedroom apartments which increased by 14% over the year. The outlook for further rental growth remains solid despite the elevated levels with the residential vacancy rate tightening through 2024. The residential vacancy rate for the Inner-City precinct (0-4km radius of the GPO) remains below the natural equilibrium level with latest results at 2.5%.
Prices
Values of Inner-City apartments increased by 0.5% over the year to June 2024, outperforming the broader metropolitan apartment market, albeit marginally. According to the REIV, Inner-City Melbourne apartment median prices faltered over the quarter, having decreased to $597,000 as at June 2024. The values of 1-bedroom outperformed other sized Inner-City apartment values over the past 12 months, with median prices of 1-bedroom apartments rising to $381,000 as at June 2024. Values of 2-bedroom Inner-City apartments also increased over the past 12 months, whereas median prices of 3-bedroom apartments recorded marginally over the year having outperformed other apartments over the past three years. With solid rental growth coupled with a constrained pipeline, Urban Property forecasts that the strong values of Melbourne Inner-City apartments will be supported in the short term.
Supply
Currently there are 6,300 apartments under construction within the Inner-City Melbourne region. Over 2024, Urban Property Australia research projects the second lowest level of new Inner-City apartments delivered to the Melbourne market in 10 years with 2,400 new apartments forecast to be completed over the year. The vast majority of the pipeline of new apartments for the Inner-City currently under construction are within the build-to-rent sector. Of the 50 new developments currently under construction, 43% of the apartments are located in Docklands, followed by 22% in Kensington and 21% in Southbank. Looking ahead, while there are a further 20,500 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 is projected to remain below the average annual levels for the next five years despite the near all-time record population growth.
Demand
Transactional activity for apartments in the Inner-City region remains relatively lively with almost 3,000 sales recorded over the first half of 2024, in comparison to the average half year volume of 2,800 sales. The majority of transactions were focused on Southbank and CBD-Core located apartments which collectively accounted for 55% of all sales followed by those based in the Docklands (13%). Looking ahead, Urban Property Australia’s research forecasts that the transactional activity of the Inner-City apartment market will continue to strengthen as investor demand gathers momentum buoyed by the recovering rental levels but may be moderated by the limited pipeline of new apartments.
Vacancy
While the Inner-City’s residential population has begun to recover the losses it suffered over the past two years, its population remains below the all-time high recorded in 2020. According to the REIV, as at June 2024, the residential vacancy rate for the Inner-City precinct (0-4km radius of the GPO) was 2.5%, slightly above the rate recorded 12 months ago, however vacancy levels have tightened through 2024 to date. While vacancy rate has trended down since the peak of 9.0% in March 2021 (an all-time high), looking ahead, Urban Property forecasts that the vacancy rates for the Inner Melbourne precinct will continue to remain below 3% as employment in the CBD picks up, international students return coupled with a relatively constrained pipeline of new apartments.
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