A leading real estate services firm believes sites suitable for apartment developments in central Melbourne will continue to be a hot commodity in 2016, despite current oversupply concerns that shroud the city.
CBRE recently sold three sites in Melbourne - which have residential zoning approvals for more than 800 apartments - to Chinese buyers for more than $56 million.
CBRE Victorian state director Mark Wizel said while buyers and developers are aware of concerns that the apartment market in inner-city Melbourne may be approaching saturation point, people making those claims do need to realise that attitudes to apartments are changing.
“Nobody has their heads in the sand," Wizel said.
"We are all aware of the facts surrounding supply of apartments in Melbourne and there is no denying that supply is at high levels when compared with averages of the past decade, but the world in 2016 is very different to that in 2006 and this must be considered,” he said.
Wizel believes much of Melbourne’s new apartment stock will be absorbed by an increasing number of first home buyers, older people looking to downsize and immigrants.
CBRE’s Lewis Tong said affordability issues will make apartments in Melbourne more attractive over the coming year, especially for offshore buyers.
"Many of our offshore buyers can't believe how expensive housing within 10km of the CBD is. Apartment living is the norm in many cities worldwide, therefore, they see a clear imbalance of future demand versus supply and also the clear affordability issues relating to traditional housing in Melbourne,” Tong said.
While the three sites in question were sold to Chinese buyers, Wizel said demand from local developers is still at high levels.
“Times are changing and all suburbs that are close to retail, lifestyle and transport amenity will continue to benefit from the strong level of confidence from developers, both those based locally and abroad.”
“Developers are looking for different products than what they were a year ago, with properties that have improvements and up to five years of income being looked upon a lot more favourably than in previous years.”
But while CBRE may be predicting a strong year for the Melbourne’s apartment market, not everybody is convinced.
Amy Mylius, a buyers’ advocate with Melbourne based Cate Bakos Property, believes 2016 will see a “divergence” in the performance of houses and units in city
“I think there will be a bit of divergence in the market though, the off the plan and high rise stock will probably peter off a bit. The APRA changes mean investors need a 20% deposit for those now and that’s having an effect," she said.
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