Despite current short term funding challenges, Melbourne’s strong economic and property fundamentals will see continued future growth in the local residential development sector as new residents flock to the city and its surrounds.
A who’s who of Melbourne’s property sector gathered at Colliers International’s recent Residential Development Forum to explore the outlook for the state’s CBD and suburban development landscape.
Trent Hobart, Colliers International Director of Residential Development Sites, told guests that while the industry was currently facing some short term banking issues, these were already being worked through and didn’t appear to have dampened the sector’s spirits.
“Developers are finding alternative funding solutions from areas like the US, Asia and even the UAE,” Mr Hobart said. “Melbourne has a strong rental market with lowering vacancy rates. In June, the residential vacancy rate was recorded at 2.3%, down from 2.7% a year earlier.
“There is also likely to be a low interest rate environment for the foreseeable future and we have a population that continues to defy critics and grow at national record levels. According to June ABS figures, Melbourne’s population grew by 107,800.
“The traditional residential market continues to be strong, with 3.6% growth in median values in the three months to June 2016, and we have a growing education sector. The University of Melbourne and RMIT have more than 120,000 students today, a number which is growing by approx. 20% per year. Victoria has strong plans in place to become Australia’s ‘education state’, and it is already our third largest export.
“Melbourne also has a government that has significantly lowered the density potential of the inner city, essentially warding off any potential over-supply."
Mr Hobart said these factors had made a real contribution to growth, coupled with an increasing disparity between apartment prices and median house prices. He said the outlook for future growth in most areas of Melbourne was positive.
“107,800 people every year choose to relocate their lives, family and homes to live in Melbourne – the world’s most liveable city,” he said. “That’s 59,000 new dwellings that need to be built each year. We believe that means 8,000 to 10,000 new apartments that need to be completed every year in Central Melbourne.
“As the CBD grid becomes almost ‘developed out’, the natural progression is the fringe and inner city ring of suburbs up to 10km from the city – from Fitzroy, Brunswick, Coburg, Northcote and North Melbourne to South Melbourne and Fisherman’s Bend."
The event, hosted by Colliers International’s Residential Development Sites team, received an outstanding response with more than 150 industry professionals attending the forum, which also featured Brae Sokolski of MaxCap Group, Sam Nathan of NPM and Colliers International’s Hamish Burgess and Bryson Cameron.
Speakers covered a range of topics relating to the future of Melbourne’s development market, including the landscape of the current construction funding environment; an overview of the Melbourne rental market and absorption; current challenges facing, and fundamentals driving, the market; and key trends within the suburban development market. Case studies which were explored in the presentation indicate that the market has taken the view that these issues will be worked through quickly and pricing has not really been affected.
“Feedback from the forum has been exceptionally positive, with multiple enquiries on opportunities that the Residential Development Sites team currently has in the market,” Mr Cameron said.