Hot demand from tenants is absorbing a sharp increase in the supply of new apartments in Melbourne’s north. Young couples seeking an “urban edge” lifestyle close to transport hubs are the leading demographic.
Property management experts say developers who build larger-than-average apartments and offer quality interior finishes, are faring best and renting out their properties for higher rents.
“An apartment that differentiates itself from the pack does very well in this market – it may have a bigger balcony or be north facing or it has a bigger-than-standard bedroom or a quality stone benchtop in the kitchen.”
In a heavily-supplied market, landlords have to be on the inside track. By using a property manager with a proven and established record, up-to-the-minute market knowledge and an extensive referral base of prospective tenants, property investors can maximise their chances of attracting above-market rents and long-staying tenants.
Changes to planning laws by the Victorian Government from 2006 onwards opened up large tracts of inner Melbourne to redevelopment as apartment buildings. Sites that are close to tram lines and train stations were particularly earmarked for future redevelopment.
Because of the relative affordability of land in the northern suburbs compared to other parts of the city and the north’s excellent public transport infrastructure, this area has attracted a very large share of contemporary apartment buildings.
Many new unit buildings have come onto the market in the past two years. With more to come in 2017, tenants are spoilt for choice.
Anthony Gentile, a partner and property management department manager with Nelson Alexander in Brunswick, says the rental market is currently extremely busy as students and staff at city-based universities search for near-city accommodation.
“Basically, you are getting couples going into these apartments,” he says.
“Families tend to go for the more established houses, while apartments are generally aimed at younger people looking for urban-edge living.”
Mr Gentile says units that offer extra living space attract the strongest demand.
“They are easier to rent when they have a bit of space,” he says. “But on top of that, people stay in the apartment for longer.
“The very small one- and two-bedroom apartments do rent, but we have a high turnover of tenants. People stay there for effectively the term of their contract and then try to move out and into something that is a bit more liveable.”
Mr Imbardelli is seeing the same trends in Essendon and surrounding areas.
He says young couples and single women are the predominant tenant groups for apartments. Many are looking for bells and whistles in their units, such as large balconies and stone benches.
There is also price pressure on landlords because of the increased supply.
“Landlords need to be realistic,” Mr Imbardelli notes.
“It’s foolish to offer to lease your place for $500 a week but have it empty for two months. If you lease the apartment for $475, you’ll get someone within a week and be better off.
“The philosophy we have in our office is that if it’s priced well, it will lease.”
Mr Gentile says there’s no doubt that the new supply is being absorbed into the market.
“It has had an effect on the prices,” he says. “Where two-bedroom/two bathroom apartments were once getting $500 a week, these properties have generally come back to rents of around $450.
“There are even some newish two-bedroom/one-bathroom apartments renting for below $400 a week. The new supply has definitely affected existing property and other new developments in the area as well.”