The inner north area of Melbourne continues to reinvent itself as developers find new uses for disused or under-utilised industrial land in the inner northern suburbs to cater for the growing number of young professionals who wish to rent or buy homes closer to education and employment prospects.
Following the latest Urbis Melbourne Apartment Essentials report, Mark Dawson, Associate Director of Economics and Market Research at property consultancy Urbis, says that not only is the proximity to educational institutions driving the student accommodation market higher, there is also a growing trend for buyers to purchase closer to universities and other major employment and entertainment centres.
“Proximity to the city attracts young professionals. Households at different stages of life are choosing to trade off space and live closer to where they work or study and to take advantage of the entertainment offer. So greater demand for residential property close to work, education and entertainment has been driving up prices and creating opportunities in other areas in the inner north,” Mr Dawson said.
“Apartments are a popular alternative to renters and buyers, attracted by strong connections and all the shops, cafes and restaurants that come with increased activity.”
Rapidly rising house prices and the requirement to house 100,000 extra residents per year is adding fuel to apartment demand in Melbourne.
“In the east you need to travel more than 15km from the CBD to find a median house price below $800,000; while zoning restrictions mean established areas are simply unable to meet this scale of future demand. This only adds to affordability issues in Melbourne and puts pressure on other areas to house Melbourne’s future growth; particularly those that are close to jobs and infrastructure.”
Urbis Melbourne Apartment Essentials is a quarterly report analysing new apartment sales by type, size and price in inner Melbourne. The report also tracks the future spatial evolution of Melbourne, including the scale, location and status of developments.
The report also notes that one-bedroom apartments make up 46 per cent of the current developments in the inner north area but this skewed due to the large number of apartments catering for the international student market.
“That’s skewed by a couple of big developments that have a greater share of one-bedroom apartments, and that has been particularly driven by the student market. The appeal of one-bedroom accommodation to them is affordability and international students are a great driver of the market,” Mr Dawson said.
“Across central areas of Melbourne there’s actually been a shift to more bedrooms, away from one-bedroom and more towards two-bedroom, and even three-bedroom apartments. That increasingly reflects a greater diversity in the market – not just renters, but owner-occupiers too. In part, this is driven by the price difference and value for money, and practical implications for renters to be able to have a separate bathroom and a bedroom.”
The prevalence of transport and infrastructure links continues to play a major part in the rise of apartment developments in the inner north.
“The key thing for the inner north continues to be that direct road, tram and rail connectivity into the city. You’ve got a lot of direct access points into the CBD, into the universities and employment hubs into Parkville. You’ve got direct links into major employment centres.”
Housing affordability appears to be a major reason why medium to high density living is now an appealing option for buyers in the inner north.
The market has responded in the inner north of Melbourne, with 30 apartment developments mostly sold and under construction in Q1 2015. A further 20 projects were selling off the plan, and are likely to be completed within the next three years.
Across these developments, the weighted average sales price for new apartments ranged from $468,000 to $668,000 in Q1 2015. This spread of price points obviously sits well beneath a detached house in Fitzroy, where the median price reached $1.4 million in the three months to April 2015 (Core Logic July 2015).
As the economy continues to shift to white collar employment, disused industrial sites that are close to the city and transport have a massive role to play in housing Melbourne’s future growth; adding choice and affordability for residents.