Melbourne Apartment Market Conditions: A Comprehensive Analysis and the Path Forward

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The active pipeline of apartments going forward is around half the volume delivered during the peak of supply in 2015-2017.

Despite the pipeline’s potential supply, around half of it remains inactive. Many of these approved projects have been halted due to various factors, with 35,000 approved dwellings that are yet to begin construction.  

With a focus on the Build-to-Rent (BTR) sector, our research shows that despite more than 12,000 BTR apartments being in permit-approved and under-application projects, only 48 per cent have financial backing. Without suitable financial solutions, this potential supply cannot be unlocked.  

The rental market in Inner and Middle Melbourne has also been significantly impacted by the increasing demand and stalled supply. Melbourne’s rental vacancy rate stood at 1.3% in May 2024, well below the long-term average of 2.6% from 2018-2024. This scarcity in the rental market has driven up the median weekly rent by 4.8% over the past year and 16.4% on average over the last three years. 

Our team looked at the government’s housing target and how Inner and Middle Melbourne are positioned to meet this target. It reveals a clear deficit when comparing annual housing targets with average annual building approvals between 2019-2023. Based on the existing pipeline and current forecasted demand, Melbourne will be in deficit of approximately 52,800 apartments by 2029. 

The report delves into the impact of the existing tax regime, including the Foreign Purchaser Additional Duty and the changes to off-the-plan concessions, on the apartment market supply pipeline. It suggests that these policies have contributed to the decline in apartment supply. 

Our experts have suggested a potential solution. Halving existing duties could double the sector’s output and catalyse approximately $640 million in tax revenue. This could be a significant step towards unlocking much needed housing supply and meeting the government’s housing targets.