The Melbourne suburbs with hundreds of cheap, brand-new apartments

Thousands of new Melbourne apartments are sitting unsold, creating a backlog of lower-priced units acting as a major handbrake on the supply of new housing in areas earmarked for major development.

The state government is being urged to create new tax breaks to help clear the stock and ease housing pressure, as experts and industry bodies cast doubt on the government’s ability to achieve its ambitious housing supply goals.

New analysis by independent property advisory firm Charter Keck Cramer reveals there are 8000 completed apartments in metropolitan Melbourne – or 17 per cent of units completed between 2020 and 2024 – that developers have been unable to sell.

The data shows the unsold apartments are concentrated in the CBD, Southbank, Footscray and in Box Hill – a suburb set for a proposed Suburban Rail Loop station and earmarked for further densification.

Hundreds of other unsold units are also in suburbs earmarked for major apartment development under the government’s activity-centre planning overhaul, sparking concerns about whether property developers will be willing to build the apartments that the government envisions.

Richard Temlett, Charter Keck Cramer’s national executive director, said the Allan government would fail to meet its housing supply targets unless the apartments were sold, as developers would be unlikely to initiate new projects.

He said the unsold stock was significantly cheaper than the newest cycle of apartments due to the rising costs of construction.

The unsold apartments can be bought for about $8000 to $10,000 per square metre, while apartments entering the market now need to be priced at $12,500 to $15,000 per square metre.

Melbounre’s CBD has more than 1000 unsold, new apartments.Credit: Wayne Taylor

“So it is a concern from the developers’ perspective because that stock needs to be removed from the market so it’s not competing with new stock on price point,” he said.

“It is a major issue because it’s holding back new supply, and housing is only going to get more unaffordable and rents will increase more.”

The advisory firm is calling on the government to remove stamp duty on the old stock for at least 18 months for local and foreign investors, who would then rent the units out to key workers or middle-income earners at below the market rate. Foreign investors would also be exempt from the additional purchaser duty under the proposal.

Temlett said this would have several benefits: removing the excess stock from the market, allowing developers to build more homes, and creating affordable rentals to ease housing pressure.

“With this stock absorbed by the market, new stock could enter the market at higher price points which is reflective of current build costs,” he said.

The government’s current stamp duty discounts only apply to properties bought off-the-plan and are due to expire in October.

The data shows there are 1622 unsold new apartments in the CBD, 676 in Southbank, 597 in Footscray and 504 in Box Hill.

Some suburbs set to become new “activity centres”, or those slated for Suburban Rail Loop stations – earmarked for accelerated development and more apartments – have dozens of unsold properties casting doubt over the viability of more units.

They include South Yarra (161), Coburg (183), Brunswick (113), Glen Iris (82), Clayton (91) and Oakleigh (73).

Many of the unsold apartments are vacant, however, some are being rented out by developers until the market turns.

Under the state government’s Housing Statement, it aims to build 800,000 new homes in a decade to solve a housing affordability crunch that it blames on supply – meaning it needs to build on average 80,000 homes each year.

Swinburne University planning expert Dr Stephen Glackin doesn’t think the government can achieve its housing targets under the current circumstances.

“Development is dropping off, and costs are through the roof. Without working with the development sector, I don’t know how it’s going to work,” he said.

“There is a disconnect between what developers can do and what the government wants.”

Glackin believes the surplus of unsold high-rise apartments in areas like Footscray is due to low consumer demand at the current price point, along with inferior construction and urban design quality.

The development at the Joseph Road precinct in Footscray is widely seen by planners as one of Victoria’s worst examples of urban renewal.

Glackin thinks the government needs separate building codes for medium-density housing, generally seen as more desirable than high-rise apartments, to make them more viable.

Despite the surplus of apartments, Temlett denied there was an oversupply, instead saying there had been low sentiment among local buyers due to higher-than-usual interest rates, while foreign investors were put off by higher taxes compared with those in other Australian cities.

“If nothing changes and supply doesn’t increase, interest rates will continue to decrease, demand will increase and they’ll price upwards,” he said.

Urban Development Institute of Australia Victoria chief executive Linda Allison said the apartment market had been under enormous pressure since COVID which had impacted price and affordability.

“At the moment, it’s going to be very hard to deliver 80,000 dwellings a year, so we need to deliver housing right across the spectrum,” she said.

“We need tax reform to make sure we can get close to those measures.”

Property Council Australia Victorian executive director Cath Evans said without tax relief, new homes around existing infrastructure would remain unaffordable.

“Targeted concessions in well-placed locations would facilitate rapid growth and help unlock feasibility for apartment living across Melbourne,” she said.

Opposition planning spokesman Richard Riordan said the government was punishing developers and small businesses who wanted to build homes but couldn’t make the numbers work.

“We’ve got 8000 completed apartments [unsold] while builders can’t get new projects off the ground unless prices rise to unaffordable levels. That’s a market failure, and it’s the direct result of Labor’s broken planning system and tax-obsessed approach to housing,” he said.

The state government did not respond to a request for comment.

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