Melbourne apartment offerings contract from 2010 exuberance

The total number of active Melbourne apartment projects has fallen below 300 for the second successive quarter in September, a decline of just over 4% from the previous quarter, according to research by Oliver Hume.

The number of active projects is the lowest since the June quarter 2010.

If fully developed – and the majority are expected to be – the 284 projects will deliver about 41,400 apartments over the coming years, compared with about 293 projects and 33,450 apartments in the corresponding quarter 12 months ago.

Oliver Hume defines a “project” as those that are pre-selling off the plan, under construction or completed with available stock

Of the 41,400 apartments, just under 23,000 are in buildings already under construction or completed, with about 12,600 apartments released over the last year.

Five municipalities contain 60% of all metropolitan Melbourne apartment projects. The most active apartment market is still the City of Melbourne with 17,400 apartments, followed by Stonnington and Yarra. Boroondara and Port Phillip round out the top five.

The research reveals that developers are building bigger apartment complexes, with the average number of apartments per project now at 157, up 10% from 143 in the previous quarter and from 123 in the corresponding quarter 2010.

The median entry price for one- and two-bedroom apartments is $369,000 and $520,000 respectively, with the price differential between the one- and the two-bedroom units $151,000, up from about $115,000 when records commenced in 2008.

Since 2008, the entry-level price of a one-bedroom apartment in metropolitan Melbourne has risen at an average rate of 3.3% a year, from $335,000 to $369,000.

The entry-level price of a two-bedroom apartment has risen by 5% a year, from $450,000 to $520,000.

Despite the quarterly drop in apartment projects Melbourne remains the “Manhattan” of Australian cities, with the Victorian capital accounting for a record 44% of all Australian multi-unit approvals in 2010-11.

In 2010-11, multi-unit approvals fell just short of 23,800, according to Metropolitan Melbourne According to an apartment market report compiled by Oliver Hume this was almost a third more than the 16,400 approvals granted last year and three times the 6,600 approved in 2005-06.

The rise in apartment approvals in Melbourne is even more noteworthy when set against declining national multi-unit activity, which dropped 11% in the June 2011 quarter compared with the March quarter of 2011 and is now 5% lower than a year ago.

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