Melbourne’s apartment market is starting to gain momentum

After a number of years where Melbourne’s apartment market has struggled to keep pace with the likes of Sydney, there are signs that unit prices are starting to gain pace.

According to CoreLogic, apartment values in Parkville, Carlton, North Melbourne, Southbank, Docklands, East Melbourne and central Melbourne all saw growth accelerate over the past quarter and regain some of their lost ground.

Parkville units saw the sharpest rise, increasing 9.1 per cent or $48,000 to $571,338, after they had fallen 0.6 per cent in the previous quarter.

Carlton also saw its values increase by 5.2 per cent, after dropping 2.8 per cent in the previous three-month period, taking the median up by $17,200 to $349,078.

Inner city, North Melbourne also jumped by 5.6 per cent, Southbank increased by 4.4 per cent, East Melbourne was up by 3.5 per cent, Docklands by 3 per cent, and central Melbourne rose by 2.7 per cent.

According to CoreLogic, Melbourne apartments have struggled over the past few years on the back of a number of policies put in place by the State Government. The first issue that impacted the entire state was the ongoing government-imposed lockdowns, which were the strictest in the world. That led to a mass exodus out of central Melbourne and especially apartments.

Following on from the lockdown period, the government has since introduced more tax changes that impact homeowners as well as changes to rental laws that have put off some investors.

As a result, apartments in Melbourne have underperformed houses and were also lagging behind their counterparts in Sydney, where prices have steadily been on the rise.

CoreLogic said the prices have been rising recently, with buyers looking to capitalise on the slower growth and higher level of affordability in those areas.

Owner-occupiers have also been a key segment of the market in Melbourne, with the record-tight level of vacancies forcing many people into homeownership at the more affordable end of the market. At the same time, investors have started to return as well after a period where many left on the back of the recent government policy changes.

At the same time, a large portion of the apartments in Melbourne has also been paid for in cash, with a recent PEXA report showing that across the city there were 1697 properties worth $1.3 billion settled without a mortgage.

The other factor in Melbourne’s favour continues to be the record increase in immigration. Over the past 12 months, immigration levels have been at the highest level on record, which is putting the supply of homes under extreme pressure.

Melbourne’s population is predicted to overtake Sydney by 2031-32 when it is forecast to reach six million, putting it ahead of the Harbour City according to data from the Centre for Population.

One of the big emerging trends we’ve seen over the past few months has been the affordable end of the market outpacing the more expensive areas for growth. Many locations that are considered affordable have become very appealing to buyers, in particular apartments that have not kept pace with the rest of the market.

So while the Melbourne apartments have been slow for the past 12 months, things are starting to turn around.

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