By Mark Dawson | 10 Apr 2017

Apartment sales in Melbourne are steadying, according to property consultancy Urbis. The latest surveys indicate a slowing of sales volume overall from levels seen in the previous year, while the pace of supply additions is also receding.

Prices have climbed compared to the previous quarter in the inner north and inner west precincts, whilst dropping in the central, inner east and inner south precincts and overall.

Urbis Director of Property Economics and Research Mark Dawson says: “Prices tend to move around on a quarterly basis due to variation in stock, so we have not seen evidence of a pullback in pricing. This is more a function of luxury sales in the previous edition.”

Within the precincts, central city sales volumes slowed, which would be expected as 10 surveyed projects had already met presales thresholds. Others have likely been affected by moderating short-term demand conditions.

Future launches will give a more genuine indication of market appetite for central city projects, since there has been some easing of momentum at the tail end of major projects.

Of the projects surveyed, around one-quarter of those surveyed sold 6 per cent of their total volume in the quarter. Stripping out those projects that had already met presales targets, those in full-swing marketing achieved an average of just over 10 per cent stock sold in the last three months of 2016.

Proving there is continued demand in the market, the ten top performers worked their way through over 15 per cent of stock in the quarter.

Mr Dawson indicated that the latest research figures give a fair reflection of the conditions in the market: supply volumes are starting to scale back as financial and regulatory measures apply the brakes. “This has a dual impact upon sales volumes in the short term, but well-designed projects will continue to appeal to a sizeable market.”

“Future launches will give a more genuine indication of market appetite for central city projects, since there has been some easing of momentum at the tail end of major projects,” says Mr Dawson.

“Sales volumes have held firm in precincts outside the central city, yet continue to remain modest in the context of central city volumes over the last two years.

“Successful suburban projects are delivering similar sales numbers on a quarterly basis compared to central precinct projects, as market appetite continues to spread to the suburbs.”

The weighted average sales price for inner Melbourne in the December 2016 quarter was just shy of $658,000, offering some hope to first-time home buyers.

Thirty-five per cent of projects had a weighted average sale price below the $600,000 mark and would be eligible for stamp duty exemptions under the new thresholds in place from 1 July 2017. A further 45 per cent of apartments would qualify for the sliding scale up to $750,000.

Urbis envisages a boost to short-term sales volumes in the first half of 2017.

Mr Dawson explains: “We’d usually expect to see some uptick on the back of Lunar New Year followed by the effects of a race to the finish in Q2 as efforts to boost investor sales ramp up in advance of the stamp duty concession changes on 1 July.

“This will coincide with some big projects that are ready to launch and those that are being fast-tracked so would expect a further kick in sales in the central precinct.”

The short-term supply boost will be offset by continued slowing of the approvals velocity. This continued downward step from the 2015 peak follows the pincer movement of tighter planning in the central city, erosion of tax incentives and the continued tightening of both project and purchaser funding.

Although the Reserve Bank of Australia has again opted to keep the official cash rate unchanged at 1.5 per cent, several banks have opted to increase rates independently as well as restricting investor lending for apartments.

Mr Dawson believes that future absorption from record population growth, tightening of rental vacancy rates amid increasing housing affordability issues and government policy will present further opportunities for apartments.

“Whether purchased or rented, there is continued dwelling demand where the jobs are and Melbourne is well placed in that sense, but it will take time to see the full combined impact of first-home buyer concessions, investor restrictions and supply moderation as the various policy, regulatory and market levers are pushed and pulled.”

  • Across the 40 projects surveyed (accounting for 7,500 apartments) the average was for 6 per cent of total stock sold in the quarter.
  • Within the precincts, central city sales volumes slowed as 10 surveyed projects had already met presales thresholds and others have likely been affected by moderating short term demand conditions.
  • The weighted average sales price for Q4 2016 in inner Melbourne was just shy of $658,000 – ranging from $621,000 in the central precinct, to a high of $749,000 in the inner east.
  • Prices climbed compared to the previous quarter in the inner north and inner west precincts, dropping in the central, inner east and inner south precincts and overall.
  • Across the market, the lowest price for a one-bedroom apartment without a car space fetched $350,000, while a three-bedroom, three-bathroom apartment gained a lucky owner at $5.4 million.
  • Over one-third of sales came in under $600,000 at the more affordable end of the market.
  • The remaining 20 per cent of projects came in above $750,000, with several $1 million-plus sales.
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