City Beat July 2023: Melbourne units outperform houses as growth soars
Melbourne's unit market continues to gather steam.
Property data analytics firm CoreLogic's Monthly Hedonic Home Value Index found the value of Melbourne units grew by one per cent in June, following gains of 0.9 per cent in May and a more modest 0.1 per cent rise in April.
Growth in the unit market, which incorporates both apartments and townhouses, outstripped the growth in house values in June. House values rose 0.9 per cent.
CoreLogic's Research Director Tim Lawless says a lack of available supply continues to be the main factor keeping upwards pressure on housing values.
“Through June, the flow of new capital city listings was nearly -10% below the previous five-year average and total inventory levels are more than a quarter below average.
"Simultaneously, our June quarter estimate of capital city sales has increased to be 2.1% above the previous five-year average.”
Although housing values continue to record a broad-based upswing, the pace of growth across most capitals eased in June.
“A slowdown in the pace of capital gains could be a reflection of a change in sentiment as interest rate expectations revise higher,” Lawless added.
“Higher interest rates and lower sentiment will likely weigh on the number of active home buyers, helping to rebalance the disconnect between demand and supply.”
Melbourne's off the plan update July 2023
Reports from local agents is that downsizers continue to be the key market segment in the off the plan space.
Burton's Estate Agents' Jack Roberts says he's seeing the interest rate environment of 2023 has all but precluded the first home buyers from the market for the next few quarters.
He says the undersupply of good quality apartments has started to grip the top end of the market, and that's encouraging downsizers to make quicker decisions than they tend to.
"We have had a steady increase of buyers enquiring on projects, then informing the team they will not be going ahead and would rather the certainty of established property, only to return to the display suite three or six months later and say what they want is only available off the plan."
Roberts has seen the trend at South Yarra House, the sustainable South Yarra project by Nick Moylan's Wattletree.
The SJB-designed, Art Deco-style development offers a range of three-bedroom apartments starting from $1.8 million. They each have two bathrooms and two car spaces.
The project also features a rooftop pool, private dining area with barbecue terrace, and seated breakout areas set in extensive landscaping.
"Established Apartments from 165 sqm to 260 sqm are very hard to find now, especially if you are also looking for a high level of interior appointment," Roberts says.
"This is forcing buyers back into off the plan where they can also receive a high level of customisation."
Darren Blair from Blair PropertyGroup says 2023 was been an interesting year in off the plan apartment market.
"It has been the biggest two-speed market on record - influenced by product type, sales channel, and price point," Blair said.
"We all know this could be one of the most challenging moments in recent history for developers. The cost of development has skyrocketed over the last two years, exacerbated by the cost of capital in an interest rate tightening cycle.
"The local retail market is there however, and enquiry remains relatively strong."
Blair is marketing Samuel Property's recently completed Brighton development Willow, a collection of just 14 two, three and four-bedroom apartments.
The Well Street project has been designed by architecture firm Bayley Ward, who pushed the envelope when creating the development which features a striking curved facade.
"We wanted each owner to experience a home that’s truly a step above," says Romy Jackson, Development Director at Samuel Property.
"Every residence is tailored to sit comfortably within the tranquillity of the leafy streetscape, whilst optimising the quality of views, light, acoustics and air quality.
“Willow has been designed and built for longevity. We consider the final outcome to be a timeless contribution to the character of the neighbourhood."
Farey & Coector Jarrod Farey said he's noticed a significant increase in demand for developments that have commenced construction, and or are nearing completion.
"With buyers concerned about the risk of an off the plan development actually getting off the ground, now wanting to secure the safer option, albeit happy to lose out on the stamp duty savings." Farey said.
Farey has seen that at Albero Greensborough, Citinova's boutique apartment project which is expected to be completed Q4 2023. The block of just 45 apartments has catered for every buyer, given the entry level $450,000 one-bedroom apartments, and the generously sized two-bedroom apartments from $630,000.
Farey also noted the abundance of downsizers in both enquiries and purchasers.
"[They] have a need to move and not necessarily impacted by market conditions and our the interest rate hikes as they are mostly cash buyers.
A new trend emerging however Farey has seen is enquiry from from international buyers, mostly from China and Singapore who are wanting to secure a new property in a reputable school zone for their children.