With Melbourne property taking a back seat to the excitement of the Spring Racing Carnival and a long weekend, there have been solid debates over the state of the property market across the media. Whilst affordability and accessibility have featured in the headlines, the local property market has also been a key topic of discussion, namely the potential oversupply of property given the current construction boom.
The key driver of the increasing demand for inner urban property in Melbourne is strong population growth. The state’s population grew by 1.94 per cent over the year to March, a gain of more than 2,200 people a week - the highest in the nation. Driven by job opportunities and lifestyle factors, almost five million people now call Melbourne home, a number that will rise to an estimated 8 million before 2050.
To help accommodate the million new residents over the past five years, our city has expanded in a new direction. Notable local developer Tim Gurner explains, “Melbourne needs 60,000 new dwellings every year for the next 30 years just to keep up with our population growth, so good quality apartments in the right location that offer access to amenity and infrastructure will continue to be in demand for many years to come.”
Whilst much has been reported of the new Melbourne apartments currently under construction, what is overlooked is the high-level of pre-commitment these projects need to comply with strict Australian financing regulations. According to Charter Keck Cramer’s Executive Chairman Scott Keck, “virtually no developments are built without being sold and thus over-supply of newly completed apartments but unsold, is and is likely to remain negligible… Consequently there is little in the way of unsold stock and that which is delivered to the market is destined to be absorbed.”
Whilst local buyers securing a new home or investment property are happy to wait for construction to be completed, tenants are hoping these newly constructed homes will help ease the city’s tightening rental market, where the current vacancy rate is 1.9 per cent. “Local rental demand has never been higher,” states Lucas Property Management Director Dylan Emmett. “The rental market is subject to supply and demand, but the current supply is just not enough to meet the requirements of all the potential tenants we meet each week.”
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