Wellbeing will be the best pitch to buyers as Melbourne apartment pipeline shrinks: Knight Frank
Melbourne will see 34,250 new apartments completed over the next three years, according to Knight Frank's Australian residential development review.
The pipeline is well below the 42,250 recorded in the prior three year 2018-20 period.
Of the new Melbourne apartment projects, 24,125 are planned in inner Melbourne, 8,150 in the middle suburbs and 1,975 in the outer suburbs.
However the slowdown in apartment activity hasn’t stopped Melbourne remaining the most attractive investment proposition for overseas developers and investors, who completed $185m in residential development site sales last year.
This was the second year Melbourne led the national rankings with the total representing 53% of all international investment made in Australia in 2020 ($350m) and ahead of Sydney ($139m in 2020), Knight Frank’s head of residential research, Michelle Ciesielski said.
"Melbourne’s residential development market is best described as being in a holding pattern in 2020, with significant compression in the volume of major sites purchased by developers, although we haven’t seen any downward pressure on average values to date.
“For new apartment schemes in Melbourne, there will need to be increased focus on wellbeing elements, functional gardens with dry and wet exercise areas in their design features – especially given the sheer amount of time Melbournians have spent lockdown in their homes.”
High-density developments accounted for 59.3% of total sales last year in Greater Melbourne, down from 69.4%.
Low density developments were also lower at just 15.2%.
"This shift resulted in huge growth across Greater Melbourne for sites purchased for medium density development, accounting for 25.5% in 2020 in comparison to 4.9% the prior year," the report noted.
"As part of this, medium density building approvals in Victoria increased slightly by 0.8% in 2020, to total 11,194 dwellings."
Greater Melbourne recorded $520m of high-density purchases last year, down 39% from 2019, with Box Hill, South Melbourne and Southbank seeing the greatest volume of high-density sales in 2020.
Knight Frank's director of investment sales in Victoria, James Thorpe said developers are expressing a strong demand for quality medium to lower density projects in core CBD fringe locations.
He also noted properties holding permits for higher density development are being considered for repositioning into the Build to Rent space.
“Although Melbourne currently holds the highest number of BTR schemes in the pipeline, recent tax announcements by the state government could derail the momentum for this emerging as set class.”
Greater Melbourne recorded $520m of high-density purchases last year, down 39% from 2019, with Box Hill, South Melbourne and Southbank seeing the greatest volume of high-density sales in 2020.
