City Beat September 2023: Melbourne unit growth outstrips houses as buyers look ahead
Melbourne unit value growth doubled month on month in September, with the growth in apartments and townhouses outstripping house value growth.
Following modest gains of 0.4 per cent in July and 0.3 per cent in August, Melbourne units grew 0.6 per cent over September, compared to the 0.3 per cent growth houses in the Victoria capital posted, according to CoreLogic's Monthly Hedonic Home Value Index.
Melbourne unit values are now 1.6 per cent up over the rolling quarter, and 3.3 per cent year to date. The median value for units in Melbourne is now $612,585.
CoreLogic Research Director Tim Lawless noted that in the more expensive cities, Sydney and Melbourne, the broad middle of the market is now recording the highest growth rate after previously being led by the upper quartile.
“Possibly we are starting to see renewed affordability challenges deflecting more demand towards the middle of the market where barriers to entry are lower,” Lawless said.
Read more: City Beat August 2023: Buyers start to emerge in Melbourne's off the plan market
What's happening in the Melbourne off the plan market?
Melbourne is arguably the slowest of markets to understand the value that off the plan apartments offer currently.
Everything in Melbourne points to a prolonged period of growth. The supply and demand imbalance is the largest in the country by some distance, and the most concerning part for Melbourne is that the gap is likely to widen, not narrow. Not enough apartment developments are getting launched, nor are development sites transacting. At the same time, immigration numbers are expected to be the highest in the country.
Anecdotal feedback from agents however is that the majority of buyers are not ready to commit to a purchase yet, with confidence of deliver an issue. However more buyers are starting, or restarting, their purchasing journey now there's more confidence in the RBA holding rates.
Buxton Projects Director Josh Buxton believes there's a real opportunity to make money in the off the plan apartment market at the moment.
"Over the next decade we’re going to see a large shortfall of supply, and at some stage those pressures will come in and people will realise there’s money to be made in buying off the plan property," Buxton said.
"When property prices jumped by 40 per cent in some areas during COVID, off the plan prices didn’t move which is incredible. That means you’re still buying at a price that you might have afforded back in 2020. Buyers can’t do that in the established market after such significant price jumps."
Buxton recently started construction on ADA Toorak, just 22 three-bedroom apartments designed by Paul Conrad on Malvern Road.
Buxton said he couldn't believe how quickly enquiry changed when they started building.
"There was a really distinct line. It wasn’t when the site was demolished, or site prep, but as soon as the concrete was poured, then we got activity."
Construction on the striking building is slated for mid-2024. Buxton says ADA brings something different to Toorak, offering a more affordable solution to the bluechip suburb without compromising on quality.
"We wanted to provide the quality Toorak locals have come to expect from high-end homes but in an apartment. We really pushed on the landscaping too so downsizers are still surrounded in greenery without the maintenance of a large yard.
OSK Property is finding buyers are saying the same about builder confidence at BLVD, their latest stage of their $2.8 billion Melbourne Square development in Southbank.
BLVD, which follows two completed residential towers, comprises 591 apartments and a suite of wellness facilities and sustainability features which have become the cornerstone of the masterplan.
OSK Property Sales and Marketing Director Ivy Chen said they are seeing success because of the certainty they bring to the off the plan apartment market.
"What is influencing buyers is having the certainty that construction will indeed go ahead. They will research the quality of past projects as evidence too."
Chen says demand for both completed and off the plan apartments is very strong at the moment.
"There has been a big change from previous years with a noticeable switch of purchaser type from investors to owner occupiers. Now more than half are owner occupiers," Chen advised.
She says buyers are more demanding in their requirements for floor plan layouts, views, and storage space, as well as whether the development has any sustainability or wellness features, the latter more of a requirement since COVID.
"People are definitely more focused on their mental and physical health now," Chen noted.
Lendlease have quickly secured two thirds of sales at their Regatta at Collins Wharf development, which has prices starting from $591,500 through to nearly $4.7 million.
Lendlease Head of Apartments Daniel Dugina said the significant demand demonstrates the return of confidence in the off the plan housing market.
He said the development has been welcomed by first home buyers through to downsizers seeking a quality home within the desirable dual-waterfront neighbourhood with easy access to the CBD.
“Regatta at Collins Wharf is the next stage of our ongoing investment in the area, with the precinct’s location presenting an exciting opportunity for Melbourne's city centre to stretch further westwards and engage with the water, connecting its maritime past with the contemporary vibrancy of the city for residents, workers and visitors.”