Bigger apartments better for rental growth in Melbourne

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Larger inner Melbourne apartments have produced better rental growth than smaller apartments over the last five years.

Two and three-bedroom apartments in the Melbourne CBD, Docklands and Southbank areas have shown the best grwoth in rents over the five years to December 2010, according to research by LandMark White. Average rents for three-bedroom apartments have increased by just over 50% in that period, to an average $677.50 per week.

The firm's national research director, Vanessa Rader, says that the rental market has been strong for all sizes of apartments across the Melbourne CBD, Docklands and Southbank. However, she highlights that the growth profile for one-bedroom apartments is the lowest across the three areas, due to the high number of apartments and lesser demand.

"With the average rentals for all apartment types showing good consistent growth, greater level of investment has been in the market competing for stock, predominately two-bedrooms as these are more attractive to sharers," said Rader.

Rader also warns that while the volume of sales in the inner apartment market held up for much of 2010, anecdotal evidence suggests sales rates have slowed over the first quarter of 2011 and this may have a dampening effect on values. More apartments are set to come onto the market, too.

"The CBD has over 3,000 development approved apartments peppered throughout the city to add to the current 2,100 under construction," she adds. ""Docklands has a further 1,145 apartments with development approval, in addition to the 881 under construction, with another 280 in planning phase."

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