By Mark Dawson | 5 Dec 2019

Urbis undertook detailed sales analysis of 57 projects in Quarter 3 2019 for the Apartment Essentials series. Sales across these projects suggest the market is slowly picking up.

Apartments are an essential part of the housing market. The trends shaping Melbourne’s future reveal a clear need for them. Affordability and population growth are two major factors that can be better managed with more apartment supply. Market confidence is emerging from a two-year time-out, with slower sales rates, declining approval rates and fewer launches coming to a head, questions are being raise about how to accommodate Melbourne’s growing population in the short term.

Urbis undertook detailed sales analysis of 57 projects in Quarter 3 2019 for the Apartment Essentials series. Sales across these projects suggest the market is slowly picking up. On average, 10% of available inventory was sold for the second consecutive quarter continuing the improvement from Quarter 1 2019 (8%).

The average sale price (weighted by product) has held firm. For Quarter 3 2019, the price registered $621,000. Looking back at the last two-years, the average quarterly sale price has maintained a range between $606,000 and $678,000.

“The sales slowdown over the last two-years expanded development timelines and will slow delivery of new homes” said Mr Dawson,  Director at Urbis.  As the market gathers momentum Melbourne will need a range of options to release supply for sale and for rent in high demand areas.

Approvals continue to trend lower in 2019 than recent years. Across the Essentials study area, 1,376 apartments were approved in Quarter 3 2019, bringing the quarterly average to 1,189 approvals this year. This means the 2019 quarterly approval volume equates to only 24% of apartments approved on average the previous year (4,905 apartments per quarter were approved in 2018).

“The risks of an apartment supply gap are increasing in the inner-city hotspots,” Mr Dawson said. “In our inner cities there are opportunities to increase supply where rental demand is greatest. However, the current state of the market is slowing down delivery of homes in these areas.  The risk is growing of a shortfall in delivery in the future.”

So far this year, 60 new developments offering 6,000 apartments have launched to the market with a further 2,000 apartments expected to launch before the end of 2019. This is around half the average volume of the last two years, which saw over 20,000 units launched in 2017 and 15,000 units launched in 2018. The declining rate of project launches combined with the declining approval rate risks bringing forward a sustained shortage of homes in Melbourne.

In terms of delivery – across the Melbourne inner city markets – we only have 1.5 years’ worth of housing demand in apartment supply that is under construction and a further 0.6 years of demand in pre-sales.  

Recent work by Urbis in collaboration with Allens: Build-to-rent the future liveability of Australian cities identified there could be opportunities to tap into an additional two to three years’ worth of demand in supply that is already approved but not actively marketed for sale, by incentivising the Build-to-rent market.

There are signs that the market has edged past the bottom. The speed of sale has started to creep back-up. In the last two years, the volume of active supply has dropped back. It will take time for the market to deliver the volume and range of housing we need to support Melbourne’s growth.

So, whilst the market’s fingertips reach for a sales-led recovery, the industry is scratching the surface with Build-to-Rent. Incentivising investment and development in this market could help smooth the pipeline by encouraging institutions to grab onto housing delivery with both hands.

  • Weighted average sale price of $621,000 recorded
  • 13 projects with 1,687 apartments launched in the quarter
  • One-bedroom, one-bathroom made up the majority of sales at 47%

Contact our expert team to find out more.

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