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News release


Melbourne’s apartment supply pipeline broadens

Inner northern and southern fringe precincts to account for a large portion of future supply

​​JLL’s July Melbourne Apartment Indicators Report emphasises the widening geographical spread of apartment development across Inner Melbourne. Fringe locations are continuing to attract multiple apartment developments driven by a scarcity of inner city development sites and the increasing proportion of owner occupiers within the profile of buyer demand.  This represents a shift from the previous development concentration within the Melbourne City, notably the CBD and Southbank. 
Inner Melbourne’s apartment supply pipeline is expected to continue the trend reflected in the building approvals data. Melbourne City recorded only 53% of all apartment building approvals across Inner Melbourne in the last 12 months, down from 72% in the previous year. 

Source: ABS, JLL Research​

JLL’s Head of Residential Research, Carol Hodgson said, “Local and international developers are continuing to pursue development opportunities in Melbourne’s fringe markets, due to a lack of redevelopment site availability within the Melbourne City precinct and the changing buyer profile.  Many are now pursuing boutique apartment developments like the Leroy Apartments in St Kilda and Rockley Gardens in South Yarra.” 

Global property services firm JLL has estimated that approximately 21,170 apartments are currently under construction across Inner Melbourne, with an additional 16,707 apartments actively being marketed for completion over 2016-2021.  

Ms Hodgson added, “Melbourne’s apartment supply pipeline is likely to peak in 2017-18 given a large portion of the potential supply forecast in 2019-20 remains dependent on a planning decision or reaching adequate pre-sale benchmarks before construction proceeds. Given these hurdles, JLL believes many of these potential projects are unlikely to complete this market cycle.” 

Melbourne’s strong apartment supply profile has contributed to subdued capital growth over the past 12 months.  Melbourne’s Local Government Area is now experiencing its fourth consecutive quarter of zero or declining apartment values. The median unit price for the region is now $501,000 (CoreLogic RPData).
Ms Hodgson said, “Despite pressure on the median price, well located high quality developments will continue to perform well. However there are some concerns regarding those locations across Inner Melbourne where a large amount of generic stock will complete over a short time.”
Rental growth figures remained varied across Inner Melbourne. Three bedroom apartments were the only configuration to record positive rental growth in 1Q16 (+0.3%) across the inner zone whilst one and two bedroom apartment configurations remained stable (REIV).  

JLL anticipates a period of adjustment within the Inner zone as the apartment market digests the temporary spike in new supply, although strong population growth and an extended period of low interest rates will provide some offset to the completion cycle. Access to debt finance, overall market sentiment and ongoing costs associated with ownership of Victorian residential property will be important factors in determining how Melbourne’s future apartment market evolves.