Market analysis: Melbourne apartments
As we reach the end of May, it’s time to take another look at what’s going on in the Melbourne market. While we continue to be the best-performing city in terms of value growth according to CoreLogic RP Data, there’s something a little odd going on in the apartment sector. The outer suburbs are beating out the CBD; apartments across Melbourne are stagnating and it looks like there will be plenty more dwellings flooding the market soon.
Let’s take a look at what this means for Melbourne property buyers.
Is it time to move into a Melbourne apartment?
Strength of the outer ring
If it’s value growth you are after, then you would be looking in the wrong direction if you head straight to the CBD. The Real Estate Institute of Victoria (REIV) reveals that the outer suburbs have been performing particularly well, with most of the top-performing markets lying to the west and north of Melbourne.
Epping properties, for example, have seen an increase of 10.8 per cent over the first three months of the year – strong growth in an already-strong city. But it isn’t just growth that is attracting buyers: it’s value for money too.
“This signals continuing buying demand for homes in the city’s outer suburbs, as homebuyers look for value further from the CBD in the current market,” explains REIV President Geoff White.
Values staying steady Melbourne-wide
Across Melbourne as a whole, however, apartments have generally stagnated. CoreLogic RP Data reports that from March to April of this year, values have only increased by a mere 0.07 per cent – essentially remaining exactly the same. Meanwhile, the REIV reports that unit and apartment prices fell over the March quarter by 1.8 per cent, down to a median price of $525,000. Considering that the December quarter of 2015 held growth of 1.6 per cent for these smaller dwellings, you could certainly say that Melbourne apartments are moderating.
First home buyers are about to find it that much easier to purchase an apartment.
This presents an excellent opportunity for both first home buyers and new investors. While the market is slowing, it is far easier to get yourself onto the property ladder, ride out the falls, wait for the inevitable price growth and watch your equity rise with it. Considering that apartments in the Victorian capital continue to be more affordable than their counterparts in Sydney, this is an excellent chance for people moving to Melbourne to purchase their first piece of property.
For investors, this Melbourne-wide slowdown combined with suburb-level growth just emphasises how important it is to buy in the right area.
Construction is up
It may be time to rethink your current investment strategy.
And if you’re looking for a new apartment, then you will be spoiled for choice. The CoreLogic and Cordell construction report for the 2016 March quarter has revealed that a large number of new apartments, mostly privately owned, have gone into the construction phase. Just over 350 projects collectively worth $2.6 billion are now officially underway, a major improvement on last year in terms of both value and volume.
This bodes well for first home buyers, though investors may be concerned over their capital gains. While CoreLogic RP Data has reported that Melbourne as a whole has certainly seen strong value growth over the last year, most of that has been headed by houses, which have grown by 10.79 per cent compared to last year, while units are struggling along at 4.68 per cent over the same period. With the new influx of apartments on the way, unit values could very well continue to stagnate, or even begin to fall.
Houses continue to perform strongly, however, so it may be time to rethink your current investment strategy and sell that Melbourne apartment.
Are you looking for your first home or next portfolio purchase? Make sure you work with the local experts at Nelson Alexander and ensure your next apartment buy is suitable for your property goals.
