• Values of Inner-City apartments remained steady at $587,500 over the past 12 months, however values declined by 2.7% over the quarter;
• The residential vacancy rate for the Inner-City precinct was 2.8%, lower than the rate recorded 12 months earlier when it was 3.0%;
• There are currently 6,500 apartments under construction within the Inner-City Melbourne region, but only 1,400 new apartments were completed over 2024, the third lowest annual level in 20 years.

Inner-City Melbourne Apartment Summary

Currently there are 6,500 apartments under construction within the Inner-City Melbourne region, however only 1,400 new apartments were completed in the Inner-City Melbourne market over 2024, the third lowest level of new apartments supply in 20 years. Of the 46 new developments currently under construction, 38% of the apartments are located in Southbank, with the vast majority of the pipeline within the build-to-rent sector. With the vacancy rate remaining low coupled with the limited development pipeline, Inner Melbourne apartment rents are once again nearing all-time high levels.

Prices

Values of Inner-City apartments remained steady over 2024 at $587,500 according to the REIV, outperforming the broader metropolitan apartment market, where values declined over the year. Over the December quarter however, values of Inner-City apartments declined by 2.7%. 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 $380,000 as at December 2024. Values of 2-bedroom Inner-City apartments remained stable over the past 12 months, whereas median prices of 3-bedroom apartments declined by 2.2% over the year having outperformed other apartments in recent 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 6,500 apartments under construction within the Inner-City Melbourne region. Urban Property Australia research recorded 1,400 new apartments completed in the Inner-City Melbourne market over 2024, the third lowest level of new apartments supply in 20 years. According to Urban Property Australia research, on average there are 3,600 new apartments delivered to the Inner-City Melbourne market each year over the past 20 years. The vast majority of the pipeline of new apartments for the Inner-City currently under construction are within the build-to-rent sector in contrast to the built-to-sell sector. Of the 46 new developments currently under construction, 38% of the apartments are located in Southbank, followed by 34% in the Docklands and 16% in Kensington. Looking ahead, while there are a further 22,700 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 is projected to remain below the average annual levels for the next five years despite the near all-time record population growth and state government incentives.

Inner Melbourne New Apartment Supply

Demand

Transactional activity for apartments in the Inner-City region surged in the final quarter of 2024 with a total of 5,800 sales recorded over the year, the highest level of transactions since 2016. The majority of transactions were focused on Southbank and CBD-Core located apartments which collectively accounted for 57% of all sales followed by those based in the Docklands (14%). 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 all-time high 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 in recent years, its population remains below the all-time high recorded in 2020. According to the REIV, as at November 2024, the residential vacancy rate for the Inner-City precinct (0-4km radius of the GPO) was 2.8%, lower than the rate recorded 12 months earlier. 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.

Inner Melbourne Residential Vacancy & Rents

Rents

With the vacancy rate remaining low coupled with the limited development pipeline, Inner Melbourne apartment rents are once again nearing all-time high levels. As at November 2024, median Inner Melbourne apartment rents were $575 per week, having increased by 5% over the year, according to the REIV. Over the year to November 2024, average rents for all sized-bedroom apartments in the Inner-City precinct rose by at least 5%, somewhat surprisingly led by 3-bedroom apartments which increased by 7% over the year. Urban Property Australia forecasts that although Inner Melbourne rents have close to all-time highs, further rental growth is likely with growing employment in the CBD and the rising international student numbers.

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