Buyers and renters hoping for an affordable route into some of Melbourne’s best suburbs could face a long wait as the average new city apartment costs more than $400,000 this year.
But downsizers, investors from as far afield as Sydney and those looking to move into the market could reap the benefits of developers catering to them as a safe bet in late 2022.
Australian Bureau of Statistics data shows the average price of a new apartment approved for construction in the first five months of 2022 was $411,000, the highest level for that period in Victoria’s history.
Marshall White Projects director Leonard Taplin said the increase in the number reflects not only rising construction costs but also developers hedging their bets with larger apartments aimed at smaller and larger home equity holders.
Mr Teplin said it was bad news for buyers looking for more affordable options in upmarket suburbs, which earlier this year were a growing segment of the market.
Glenarm Square in Glen Iris recently sold the last of its 120 homes, with sales driven by first-home buyers attracted by the development’s two-bedroom apartments, which are priced between $700,000 and $800,000, well below the price of an entry-level home in the suburb. 1.2 million dollars.
“Buyers are young families with one child, or expecting, and need to be in the area for work or family,” Mr Taplin said.
The The Walmer Project in Abbotsford still offers a similar option, where buyers can purchase a new condo for $800,000-$900,000 — well below the $1.1 million for an equivalent entry-level cottage size.
It is also now 65 percent sold, with the main structure of the building recently completed and numerous buyers looking to combine apartments within it.
But Mr Teplin warned that the options for these buyers in sought-after suburbs were likely to dwindle because the number of new units approved across the city in recent years has been well below average and development costs so high , making it increasingly difficult for developers to produce affordable options. in expensive zip codes.
He said the choice was so limited that there were cases of off-plan price increases of 5 per cent between March and June.
“It takes time for young families to figure it out, and the longer they wait, the more expensive it gets,” he said. “There’s going to be less opportunity to provide something, and it’s just going to cost more.”
It would also affect tenants, he added.
Samma Property Group head of project sales Chris Rice said younger buyers weren’t the only ones looking for entry-level homes in sought-after areas. Firms Samma Place Project in Ivanhoe has sold about 20 of its 134 apartments to buyers outside Victoria.
The 70 percent sold project was particularly popular with Sydney investors.
“Because of the price difference between Melbourne and Sydney, we think other developers will also feel it,” Mr Rice said. “And with the interest rate climate expected to continue to rise, people looking to invest will continue to head south.”
RT Edgar’s Tim Brown said rising interest rates would be a factor for the off-plan market in late 2022, but those paying less than $1.5 million or more for an apartment were more concerned about the cost of gasoline and groceries.
Such buyers usually buy a home immediately after selling a higher-priced home next door. Mr Brown said that while they may be “quite wealthy”, those who are retired or semi-retired and now have a fixed nest egg will revise the numbers – but are likely to buy anyway.
As a result, demand for new apartments and townhouses priced between $1 million and $3 million continues to be good, Mr. Brown said. The The Orrong Project in Armadalewhere two-bedroom homes start at $1.15 million, have been popular with those buyers, he said.
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