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Melbourne apartment values rising

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Melbourne apartment values rose in more suburbs that Melbourne house values during the last 3 months according to recent CoreLogic research released this week.

Suburbs where apartment values rose the most in the last 3 months include;

  • Carlton – 6.7%
  • Docklands – 4.6%
  • North Melb – 3.9%
  • Windsor – 3.6%
  • Clayton South – 3.5%
  • Mill Park – 3.4%
  • Avondale Heights – 3.2%
  • Clarinda – 3.3%
  • Notting Hill – 3.2%
  • Parkville – 3.1%
  • Melbourne – 3.1%

You can check out the apartment value growth in your suburb here.

Interestingly when you search apartment value growth over the last 12 months a completely different suburb list appears. This shows how volitile the market still is. It also displays the noise or imperfection of a median value price as a market indicator. I have discussed this previously here.

CoreLogic research found Melbourne apartment values rose in 38.3% of suburbs analysed over the first quarter of 2024, but Melbourne houses rose in only 34.1% of suburbs analysed during the same period.

CoreLogic Economist Kaytlin Ezzy says “The broad-based capital gains seen over the past year reflect the ongoing imbalance between housing supply and demand, which has helped to counteract the less favourable market and affordability conditions.

“Despite rate hikes, worsening affordability, and the rising cost of living, the increasingly entrenched undersupply in housing stock, and above average demand thanks to strong net migration, has helped push values higher.”

Tim Lawless of CoreLogic said “I wouldn’t be surprised if we see more suburbs where units outperform house price growth from here onwards because of affordability and supply constraints. House values are reaching an affordability ceiling, which will limit their future rate of growth, while units still have plenty of room for capital gains.”

CoreLogic did the same analysis for rent and showed Melbourne apartment rents rose in 100% of suburbs analysed and Melbourne house rents rose in 99.1% of suburbs over the last 12 months.

Melbourne apartment rents rose buy more than 15% over the last 12 months in many suburbs which was mainly in outer areas. The 12 months prior to this would have been dominated by the inner suburbs which shows the movement to outer suburbs to find better value.

Those suburbs with the greatest uplift in rental value over the last 12 months are;

  • Clayton South – 20.3%
  • Noble Park – 18.1%
  • Notting Hill – 16.3%
  • Clayton – 16.2%
  • Springvale – 15.9%
  • Preston – 15.5%
  • Keilor East – 15.5%
  • Dandenong Nth – 15.5%
  • Airport West – 15.4%
  • Clarinda – 15.1%

We continue to look to the future to see what the outlook holds for both apartment capital and rental values. As discussed previously, demand continues to outstrip supply and apart from a slight tightening of future migration, nothing seems to be changing. Melbourne recorded the highest net migration in Australia of 167,500 during 22-23. Interestingly only 6,678 people moved out of Melbourne.

While this influx of people to Melbourne has seen a sharp rise in rents, we expect this to put upward pressure on apartment capital values over the next 1 -2 years. During this time interest rates should start to ease and a number of recent immigrant renters will become buyers.

At a recent apartment market breifing by Charter Keck Cramer (CKC), National Exective Director of Research, Richard Temlett confirmed his numbers show there is a significant shortfall of apartment developments. To meet the forcast demand. Melbourne needs to deliver between 15,000 to 18,000 each year. CKC estimate in a very best cast supply will range from between about 5,000 to 10,000 each year for the 4 years from 2024 to 2027.  This includes both build-to-sell and build-to-rent projects.

This research by CKC demonstrates that the State Goverment’s objective to deliver 800,000 new homes (of which a large number would need to be apartments) over 10 years, unachievable by a large margin.

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