For the past three years Melbourne's vacancy rates have been under 2%. Rents are on the rise, and with a major dwelling supply shortage Victoria is seeing opportunities in the recovery. Andrew Johnstone reports.
Rental vacancies are at historic lows in Melbourne and like other capitals, the city is facing a sustained dwelling shortage. Melbourne vacancies for the last 3 years were: 1.4% (2009), 1% (2008), and 1.4% (2007).
"Melbourne is still in the midst of probably the greatest shortage of rental property we've seen in a long time," says Robert Larocca, spokesperson, Real Estate Institute of Victoria (REIV).
Low vacancy is forcing up rents, with the rental market expected to be tight at least until developers recover and start bringing new stock to market.
According to Residex, prices for houses and units in Melbourne rose by 5.05% and 4.62% in the June quarter. In the last 10 years, prices for houses and units in Melbourne have risen 9.83% and 9.97% annually.
"A spike like this is what you might see as confidence builds in the marketplace which is what we have been seeing," says Larocca.
According to REIV, recovery in the July quarter was led by the upper end of the market. Prior to this it was the affordable segment supporting the market.
"The fact that the upper end of the market is coming back quite strongly will probably ensure, as long as the overall economic circumstances remain as they are, will probably ensure a healthy spring," says Larocca.
Following the first home owner's boosts, Larocca sees two key drivers fuelling growth in the coming quarter: population growth and affordability because of low interest rates.
"Melbourne is seeing an increase in population of 1,800 people per week, and that is a boost on the demand side of the equation and it's not being matched on the supply side," he says.
Apartments grew faster than houses
REIV reports apartment growth has outstripped growth in houses. In the five years to June 2009 apartments grew by an impressive 34% compared to 20% for houses.
In Footscray, the median for a unit increased by 60.2 per cent from $240,000 to $384,375, an increase that is nearly double what was recorded in Coburg which increased by 36 per cent from $331,000 to $450,000.
Units in Footscray, Coburg, Fitzroy, Carnige and Springvale have also shown strong growth.
Strong unit growth reflects a growing appetite for apartments over the past decade because of the desire for proximity to the CBD, lifestyle options and transport hubs, and the benefits of new accommodation, according to REIV.
Increasing affordability from low interest rates has also made units more attractive at recent lower prices, because as a result they are showing higher yields for investors.
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