_Melbourne apartment market analysis
Site Sales Volume
In the year ending June 2019, the volume of sales for development sites suitable for high-density apartments in Greater Melbourne was 1.6% higher, with a total of $1.37 billion.
Developer Nationalities
Analysing the disclosed purchasers of high-density developments sites, by value, resulted with offshore buyers making up 41.8% of the mix in the 2018-19 financial year. The most prominent nationalities of offshore developers were from Hong Kong (57%), China (19%) and Malaysia (15%).
Site Values
The average sales rate for Greater Melbourne high-density residential sites was an indicative $120,400/per apartment at the end of June 2019, excluding CBD sites. This indicative rate has decreased 5.1% over the past year.
The range of development site values extended from $50,000 to $225,000/per apartment in Melbourne’s inner suburbs with an indicative rate of $139,400/per apartment in June 2019. At this time, middle suburbs ranged from $70,000 to $193,300/per apartment, with an indicative rate of $90,000. Site values in the outer suburbs ranged from $25,000 to $50,000/per apartment (indicative of $40,000).
Apartment Pipeline
By mid-2019, there had been 20,050 new apartments added to Melbourne’s housing supply since the start of 2018, with a further 36,550 apartments currently under construction due by the end of 2022. There are a further 15,700 apartments with DA approval currently being marketed, also forecast to be delivered within this timeframe.
The inner suburbs saw 14,950 new apartments completed in 2018 and H1 2019 with a further 29,800 under construction and 11,050 being marketed due for completion by the end of 2022.
In mid-2019, the middle suburbs saw the number of new apartments grow by 4,050 since January 2018. By the end of 2022, this is forecast to grow by another 6,250 apartments at construction stage, and another 3,200 being marketed. In the outer suburbs, 1,050 new apartments completed in the eighteen months ending June 2019 and by the end of 2022, another 1,900 currently under construction or being marketed.
Bedroom Split
The distribution of bedrooms in Greater Melbourne apartments completed since 2015 have been weighted towards 1-bedrooms with 40% of the total share, followed by 2-bedrooms (39%), 3+ bedrooms (18%) and studios (2%). Currently under construction and due by the end of 2022, there is a trend towards a lesser share of 1-bedrooms (35%) and 3+ bedrooms (17%) being built, and more 2-bedrooms (41%) and studios (7%).
Construction Costs
The cost of construction in Greater Melbourne increased by an estimated 3.5% in the year ending June 2019. In 2019, it’s estimated the cost to build an apartment to a medium standard (with a balcony) ranges from $2,930/sqm to $3,495/sqm (plus GST), according to Rawlinsons.
New Apartment Values
Greater Melbourne new mainstream apartment prices have increased from an indicative $9,700/sqm in June 2018 to $9,800/sqm in June 2019, to currently range between an average of $6,500 and $15,000/sqm (excludes prime and CBD projects).
Prices across Greater Melbourne range from $8,300 to $14,500/sqm in the inner suburbs (indicative $10,000/sqm) as at June 2019.
New apartments in the middle suburbs of Melbourne, were priced similarly given access still possible to Port Phillip Bay, at an indicative $10,000/sqm (ranging from $8,000 to $15,000/sqm), whilst in the outer suburbs, an apartment could be purchased for an indicative $7,500/sqm (ranging from $6,500 to $8,000/sqm).
Offshore Buyers
Offshore buyers pay a duty surcharge for apartments in Victoria. This equates to 7% of the purchase price, in addition to standard state-based stamp duties and FIRB application fees.