ONE BEDROOM SALES RECEIVE A BOOST IN INNER MELBOURNE AS INVESTORS BEAT THE STAMP DUTY DEADLINE

Urbis Melbourne Apartment Essentials survey assessed 723 sales from 49 off the plan projects in the June 2017 quarter.  Of these, 44% were in the Inner Melbourne area, while 56% were recorded in Melbourne’s middle ring.

Investor Surge Tipping Projects Over Presales Thresholds

A number of projects edged closer or tipped over presales thresholds in the quarter which will bring welcome supply as the wider development market tries to navigate the tougher finance market.

From the survey, one-bedroom, zero car product was the most popular product type in the quarter, accounting for 37% of total sales, compared to 17% in the previous quarter. After a period of two-bedroom stock dominating the market, this comes on the back of tightening vacancy and rental growth in recent months, with strong demand for one-bedroom rentals, combined with a marketing push to investors prior to the stamp duty changes coming into effect 1st July 2017.

Trading off Space, Price and Location

In the middle-ring, two-bedroom, two-bathroom product accounted for 38% of total sales, lifting the weighted average sale price for this product type to $628,000. The weighted average sale price for two-bedroom, two-bathroom product in Inner Melbourne is $856,000.

Looking more centrally, in the Central Precinct it is almost $900,000 and close to $1.3 million in the Inner East Precinct. As always, many buyers are trading off space, location and price. Some will choose a one-bedroom apartment without a car space in the Central or Inner East Precinct in the low $500,000s as it suits their lifestyle or rental ambitions at a lower price point than a two-bedroom apartment in the middle ring.

For others, the growing volume of two-bedroom stock in the middle ring represents an opportunity to leverage city-wide infrastructure improvements. Together, these options highlight the increasing choice available as the Metropolitan apartment market matures.

After a sustained delivery of two-bedroom stock, we have seen a slight swing back towards one bedrooms on the back of particularly strong rental demand, wider affordability conditions in the market and investor activity brought forward ahead of the stamp duty changes from 1st July.

Supply to Taper as Market Takes Stock of Changing Conditions

In inner Melbourne nine new projects launched amounting to 1,700 units in the quarter, compared to four projects amounting to 1,500 units in the previous quarter. However, only five projects (1,100 apartments) are expected to launch in the July – September quarter, as the Melbourne apartment market takes stock of conditions following the changes to stamp duty concessions and the restricted lending environment.

Market Maturing throughout Metropolitan Melbourne

Overall, the Inner East Precinct continues to attract a significant premium, with high quality projects targeting owner occupiers and downsizers, who are looking for exclusivity but with walkable amenity. However, the Central, Inner North, Inner West and Inner South Precincts are able to offer a variety of apartment types at a range of price-points – attracting owner-occupiers and investors. Combined with the rise of the more affordable middle-ring apartment market, we are starting to see greater choice permeate the wider Metropolitan market.