Why now is the right time to buy a Melbourne inner-city apartment: What the experts say
It’s been nearly two years of rolling lockdowns, but Melbourne is officially open for business. Not just to residing Melburnians, but to interstate travellers, office workers, and the rest of the world, all factors which contribute to experts’ belief that inner-city apartment prices are ripe for growth.
Buyers wanting to secure an apartment in the City of Melbourne LGA, which includes the CBD as well as popular surrounding areas of Southbank, Docklands, Carlton and North Melbourne, can save 50% in stamp duty on new apartments worth up to $1 million. If the property has been on the market for more than 12 months, then stamp duty is waived completely.
But the expectation is prices will have jumped significantly by then. Despite the pitfalls of 2021, from lockdowns, lack of interstate and international travel, and the exodus of office workers from the CBD for the best part of nine months, the median apartment value in the City of Melbourne LGA is still up 7.5 per cent year to date, research from property data firm CoreLogic shows.
Scott Jessop, the sales and marketing director at OSK Property who is currently developing the $2.8 billion mixed-use precinct Melbourne Square in Southbank, said there’s been a major uptick in enquiry volumes since Melbourne’s lockdown was lifted.
“Since mid-October we’re trending up week on week,” Jessop says, adding that there’s been activity from across the board, from buyers walking in to display suites to those making appointments.
Jessop says he just dealt with a foreign purchaser who is buying for his daughter who is studying in Melbourne. “I haven’t seen one of those transactions in over 18 months”, Jessop says, expecting that he will be seeing more as international students return.
“The combination of the generous stamp duty concessions, the continued affordability gap between house prices and apartments, and the reactivation of the CBD, will no doubt see growth ahead.
“A perfect storm is coming for the Melbourne apartments, it’s just a matter of when.”
Jessop says as demand grows, developers are likely to reduce the incentives that they are currently offering buyers. Buyers of apartments at Melbourne Square can save up to $120,000 on an apartment with an average sale price of $850,000. The savings include the government stimulus and a range of free incentives such as furniture packages and design stylist consultations.
Dennis Wilson, the managing director of Central Equity who is currently selling Focus, the soon to be complete 600-apartment Southbank apartment tower, and the completed Melbourne Grand, Lonsdale Street apartments, expects the City of Melbourne to bounce back strongly in 2022.
“The federal and state governments are working to open borders and increase business migrant intakes, stimulate the tourism industry, re-invigorate major events and welcome back international students. The City of Melbourne should be a beneficiary of this,” Wilson says.
The general consensus is that buyers are coming back from the surrounding suburbs, having spent the last few years outside of the city.
“As well as seeing buyers already living in the inner-city, we are seeing interest from people who are looking to move from the suburbs, wanting to be closer to their workplace as offices reopen, shops and all the conveniences that come with inner city living,” Wilson added.
“For many the inner city is a more affordable option than living in their existing suburbs.”
Elysa Anderson, General Manager of Residential Victoria at Mirvac, said the Mirvac team is focused on accelerating their supply of high-quality apartments in Melbourne, as they anticipate a shortage of owner-occupier residences in premium locations in the future.
“We anticipate Victoria’s population growth and demand for apartments to continue to strengthen in line with the Victorian Government’s Roadmap to Recovery and various state budget stimulus packages,” Anderson said.
“The strength of the established housing market and the opening up of international borders will continue to drive very strong demand for well-designed and quality constructed apartments,” Anderson added.
Mirvac has tweaked the design of Tower 9, in their master-planned Yarra’s Edge precinct in the burgeoning Docklands area.
The ASX-listed developer saw a considerably stronger market for their projects in 2021 than in 2020, with Voyager, the recently completed eighth tower in Yarra’s Edge, seeing a 20 per cent increase in the first half of 2021 compared to the same period the year before.
Around 80 per cent of the buyers were owner-occupiers, but Anderson says they are seeing investors slowly creep back in.
“Investors have begun to return to the market, primarily focused on master planned communities but demand is also gathering pace in the apartment markets."
For more information on stamp duty savings in the City of Melbourne, read more here.
The suburbs that can save on stamp duty:
Kensington, North Melbourne, Parkville, Carlton, East Melbourne, South Wharf, Southbank, Docklands, Melbourne, West Melbourne.
Parts of Flemington, Carlton North, Port Melbourne, and South Yarra are also eligible for stamp duty concessions.