Currently 12,600 apartments under construction in Melbourne, but vacancies reduce: Knight Frank
Melbourne currently has over 12,600 apartments under construction, expected to hit the market over the next three years, as well as other projects in the pipeline.
However, despite this high figure, Knight Frank’s Melbourne Apartment Market Update Residential Research has found that rents are increasing and vacancies are actually falling.
Over the past 12 months, the vacancy rate fell to 2.8% in May, a 0.4% drop, while rents increased to $390 per week. The average rental yield is currently 4.51%.
Over the past decade, the average has increased from 2.1% to 2.8% due to high construction in the apartment sector, however this is dropping back over the 12 months to May 2014, as recorded by the REIV.
Residential project marketing associate director for Knight Frank, Daniel Cashen, said that foreign investors continue to favour Melbourne.
“Growth from Asia has been underpinned by our great infrastructure, world class secondary and tertiary education and the reputation we have retained over the years as the world’s most ‘liveable city’,” said Cashen.
“Encouraged by urban renewal and migration towards inner city living, the CBD and inner/ north-west has witnessed a significant number of medium-high density apartment projects built to support this population growth; with presales continuing to support further projects,” he said.
As of March 2014, apartments across Melbourne’s metropolitan area saw 5.9% annual growth, to a median value of $454,000. Over the next five years, a 4% per annum result is expected.
“Highest capital growth was experienced in the Bayside/Frankston region at 7.3% over the last year, closely followed by north-east at 7.2%; while both realising a median value of $486,000,” he said.
Melbourne’s south-east has also increased – with 7.1% growth to $453,500. The CBD and inner/north-west region was subdued at 3.2% compared to the rest of Melbourne, however Cashen notes expectations are for 5% growth per annum for the next five years.
Interestingly, this is where 64.7% of apartments currently under construction are located.
Residential research association director Michelle Ciesielski said that the population growth has seen a 2.1% uptick on average over the past 10 years, with projections this will continue to 2029.
“Due over the next three years, there are just over 12,600 apartments currently under construction in metropolitan Melbourne, with a number of significant projects still proposed in the pipeline,” she said.