Unit buyers return to Melbourne’s inner city

Melbourne’s beleaguered apartment market has seen a surge of interest from first-home buyers taking advantage of stamp duty concessions and affordability.

Melbourne City units were up 7.7 per cent over the period, while Southbank prices were up 7.60 per cent and South Melbourne was up 5.69 per cent. Picture: David Crosling

Melbourne’s beleaguered apartment market has begun to see green shoots emerge following a surge of interest from first-home buyers taking advantage of stamp duty concessions and affordability.

Inner-city units in the Victorian capital bore the brunt of the pandemic’s negative impact on the property market. Closed borders, the absence of international students and prolonged lockdowns caused many landlords to sell up and homeowners to make a seachange.

New data from PropTrack published exclusively in The Australian suggests the segment is seeing a bounce back, with prices within 5km of the CBD up over the June quarter. Melbourne City was up 7.7 per cent over the period, while Southbank (up 7.60 per cent) and South Melbourne (up 5.69 per cent) were each in the black despite all being down over the year.

 

Real Estate Buyers Agents Association of Australia president Cate Bakos said an influx of first- home buyers over the past six to 12 months were not only taking advantage of relative affordability, but also new-entrant stamp duty concessions and incentives to purchase recently completed apartments within the City of Melbourne.

“They have boomed back,” Ms Bakos said. “For most, houseshares got really hard and they moved back in with mum and dad. Now they want their own space and can get pretty affordable homes in the city.”

Last financial year, anyone who spent up to $1m was able to claim a 50 per cent stamp duty concession for recently completed homes in the municipality. If the property had remained unsold for more than 12 months since the project was completed, buyers would become eligible for a full concession.

Ray White Victorian chief executive Stephen Dullens said its inner-city teams had seen a rebound in transaction numbers from the lockdown lows.

“Now that bars are filling up, restaurants are filling up. It’s a cool city and the atmosphere is coming back and there is a reason to be here,” Mr Dullens said.

Nicholas West, head of sales at local agency Nelson Alexander, was not as optimistic. He believes that while certain segments of the unit market are seeing bright spots – namely boutique and older-style properties – real growth has yet to eventuate.

“The unit market is very ­fickle,” he said. “People are re­assessing what they want in a home. It’s not a tower but a small block.”

PropTrack director of economic research Cameron Kusher believes the broader apartment market will remain more resilient to the coming downturn as the segment experiences the same growth as houses. “Melbourne and inner-Sydney have seen particularly strong growth over the last couple of years,” he said.

“There’s a very wide gap between median house prices and median unit prices, and that’s not necessarily going to revert to long-term averages, but we do think that means the unit market is going to hold up better in this downturn than housing.”

Rental markets were more likely to feel the brunt of the return of migration, Mr Kusher said.

Mr Dullens said this was already being reflected in the rent roll of the Southbank office, which has just 30 of 1200 properties under management vacant. He said vacancy and rent returns were higher than pre-Covid levels, even without migration in full swing.