By: Kyle Mortimer | 214483706 | krmortimer
Is the residential development market in Melbourne being driven by the local demand or global investment capital, developer profits or bank lending restrictions, a change in consumer expectations and desires or a need to fulfil a housing affordability issue?
All of these issues are contributing to the inner Melbourne market which is being dominated by 1 and 2 bedroom apartments, with the efficiency of this format creating the highest yield and profits for the developers, creating a stock that is affordable and moving quickly providing the presales and certainty required by the banks, however is this creating the diversity and range of products necessary to meet local demand and the future stock that Melbourne will need.
Whilst the number of new dwellings coming to market represented by apartments is high, the overall housing stock in buildings of 4+ levels at only 3.3% of the Melbourne market is low, as highlighted by Charter Keck Cramer, compared to Sydney at 10% and Toronto at 40%. This represents a significant opportunity for further urban densification in Melbourne.
Further information sourced from Charter Keck Cramer relating to the Melbourne apartment market indicate, there were 281 projects released in 2015, including 24,450 new apartments and in 2016 there will be 306 projects completed with an average size of 65 apartments per project. The majority of the developments are being delivered in the inner, city fringe and central city as indicated in the graph below.
Source: Charter Keck Cramer
To cater for the forecast growth in population for the City of Melbourne, there will be a strong requirement to provide other formats of apartment living beyond the 1 and 2 bedroom styles, with improved amenity, places for families to enjoy outside open space and areas to entertain.
As John Meagher of 360 Property highlights there is a need for more 3 bedroom apartments “for families looking for apartment living or downsizing baby boomers” as the acceptance of this style of accommodation continues to gain momentum.
In order to accommodate Melbourne’s growth projections, without urban sprawl and the associated strain on infrastructure, the apartment market must play a significant role in urban densification and therefore government, the developers, the financers and investors must create opportunities for a diversification of the product coming to market.
As developers take stock of the changing apartment market reality, slowing investment from China and Asia, a shift in the possible demographics and increasing pressure from the banks, they must find new angles to realise the opportunities and create a successful outcome.
Some developers are looking to take advantage of the void left by the recent common approach of predominately small format 1 and 2 bedroom apartments, by producing unique community opportunities for alternative market segments such as families and downsizer’s.
Hawke + King is an example of this change in apartment style being brought to the market. Brunswick Group has sort to create a “Community living” atmosphere with spacious and environmentally conscious apartments on the fringe of the city.
Hengyi’s Swanston Central, targeting local investment and owner occupiers are looking to create an environment for empty nesters or young professionals “young apartment dwellers” in a vertical community. These new developments are offering amenities beyond the stylish apartments to attract the local buyers including, a Wellness Centre with a lap pool, plunge pool, steam room, sauna, cabanas and Yoga Studio, a grand dining room with catering kitchen, garden room, library, games room and cinema and a skyline lounge that offers a private club atmosphere, complete with bespoke furniture and wine storage.