EdgeProp 29 August 2018

The Melbourne apartment market has remained robust. This comes despite negative sentiment surrounding the Victorian residential market and a high amount of supply activity. Victoria continues to lead the country in population growth, which has sustained dwelling demand and supported both prices and rental values, according to JLL Australia’s 2Q2018 Melbourne Apartment Market Commentary.


Median apartment price growth continues to accelerate across Greater Melbourne

Median apartment price growth continues to accelerate across Greater Melbourne, but some recent evidence suggests that momentum is stalling, says JLL Australia.

In quarterly data, the apartment price growth for Greater Melbourne (for both new and existing stock) increased 6.6% y-o-y to 1Q2018. This is above the five-year annual average rate of 4.5%.

According to JLL Australia, the median apartment price now sits at AU$532,888 ($532,331). However, price growth has weakened in a number of inner-city suburbs. The strong growth for Greater Melbourne is likely being driven by attached dwellings in growth areas and historically high performing suburbs.

Nevertheless, more timely measures such as Core Logic’s Monthly Hedonic Price series, suggests momentum has slowed in recent months. However, the market does appear to be holding better than Sydney.

With inner city apartment completions likely to rise again next year, re-sales on new stock are likely to come under pressure.


Annual median price growth

Source: JLL Research, CoreLogic March 2018


Rental Vacancy and Rents

Rental demand remains strong in Melbourne, as vacancy tightens further and rental growth remains above average, says JLL Australia in its 2Q2018 report.

Despite fears of oversupply in the rental market brought about by the high amount of recent apartment completions, rental growth has remained positive throughout Greater Melbourne.

For instance, rents for two-bedroom and three-bedroom apartments are growing above their five-year averages. However, while growth is still positive for one-bedroom apartments at 2.9%, this is below the five-year average of 4.0%. This slowing coincides with the high number of one-bedroom apartments in many of the inner city projects completed in 2017 and the first half of 2018.

Meanwhile, vacancy has tightened further reflecting continued strong rental demand. Inner Melbourne vacancy declined from 2.0% to 1.8% over the year to June 2018. This is marginally tighter than Great Melbourne’s vacancy which fell from 2.2% to 1.9% over the same period.

The introduction of the State Government’s vacant residential property tax (VRPT) in January 2018 was thought to loosen vacancy and put pressure on rental values by increasing rental supply. But so far, this does not appear to have had an impact. Rental demand continues to be underpinned by demand for transitory accommodation from interstate and international migrants.


Annual Growth vs 5-year Average

Source: REIV, DHHS Rental Report, as of March 2018