GREATER MELBOURNE OFF-THE-PLAN APARTMENT MARKET

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1 GREATER MELBOURNE OFF-THE-PLAN APARTMENT MARKET Edition 16 QIII. 14 oliverhume.com.au

2 At the end of the quarter, there were just under 35 off-the-plan projects across Greater Melbourne: projects at pre-construction, under construction or completed with residual product. In total, over 43, units upon completion. This is the highest number of active projects and units being tracked by Oliver Hume since records begun in 21. Of the 35 projects, over one-third were launched in 214, a sign of the strength of the current off the plan apartment market. One-third were launched in 213. Over 4 per cent of projects are located in just four inner municipalities; Melbourne, Stonnington, Yarra and Port Phillip. These inner Melbourne suburbs comprised approximately 26,6 of the 43, units, the highest number of units seen in 3 years. Our estimates suggest that around 5 per cent of all projects across Melbourne are under construction. Excluding projects released this year, the percentage of projects under construction rises to 7 per cent (noting that around 4 per cent of the 35 projects were launched in 214). In addition to the 35 active apartment projects, there are approximately 2 projects in the development pipeline that are yet to go to market across Greater Melbourne: projects at the application or approval stage. These projects will deliver a yield of an additional 37, units to the market over the near term. Around 9 of the 2 pipeline projects are located in Melbourne, Stonnington, Yarra and Port Phillip (totaling around 27, units, approximately 75 per cent of future units). Other notable hotspots include Boroondara, Darebin, Maribyrnong, Moreland and Darebin. Greater Melbourne, Pipeline by LGA As at QIII , 16, 14, 12, 1, 8, 6, 4, 2, Melbourne Port Phillip Maribyrnong Yarra Darebin Stonnington Maningham Moreland Boroondara Moonee Valley By suburb, Melbourne is expected to house ~8,6 future units (17 projects), South Melbourne with ~4,8 units (11 projects) and Southbank with an additional ~4,4 units (9 projects). 1 That said, much has been written about the oversupply of apartments across Greater Melbourne, but a structural change is slowly taking place, with multi-unit dwelling approvals exceeding detached approvals in Greater Melbourne since oliverhume.com.au P.2

3 In larger capital cities, such as Melbourne, a number of factors - demographic, social, economic have combined to favour it: 1. Large numbers of baby-boomers are now becoming empty-nesters, and many are looking for smaller homes that are easier to maintain. 2. Young people are marrying later and having fewer children. 3. Divorce rates are high, and the number of single-parent families is increasing. 4. Many more women are working, earning high incomes and choosing to live in apartments of their own. 5. A preference of an increasing number of migrants for apartment living close to education and health facilities. State Government forecasts suggest that, between 211 and 251, Greater Melbourne will require around 1 million additional multi-unit dwellings to accommodate forecast population and household growth. This equates to around 26, apartment and townhouse dwellings a year, whereas current levels are around 23, multi-unit dwellings a year. 3 As mentioned, a growing sign as to the strength of the current off-the- plan cycle, over 5 new projects launched across Greater Melbourne for the quarter, delivering more than 5,4 units: a record for Oliver Hume data going back to 211. Approximately 3% more new projects were launched in the September quarter of this year to the corresponding quarter of last year. Greater Melbourne Units and Projects New Releases per Quarter 7, 7 6, 6 5, 5 4, 4 3, 3 2, 2 1, 1 QIII. 1 QI. 11 QIII. 11 QI. 12 QIII. 12 QI. 13 QIII. 13 QI. 14 QIII. 14 Total Yield (LHS) Projects (RHS) 1 At the September Quarter 214, the median project yield was 65 units - compared to 125 units per projects around five years ago. That said, the median levels per building for future supply is expected to increase to 7 levels, a slight increase on the current six levels. 2 The current cycle is in full swing; but concerns are now gathering as to whether these levels of supply are sustainable. Certainly concerns of oversupply in some markets are warranted. Perhaps the key questions are what % of this stock when completed is destined for the rental pool. 3 In 1992/93, around 8 per cent of Greater Melbourne dwelling approvals were multi-units, in 213/14 this had risen to 53 per cent. oliverhume.com.au P.3

4 Of note, over the last 12 months, over 2, units have been released across Greater Melbourne. Of these new releases, 35 projects were located in the City of Melbourne with a total yield of around ~9,1 units (see following chart). Melbourne is followed by Yarra (~1,5), Whitehorse (~1,3) and Moreland (~1,5) in terms of additional units over the same period. The top ten rounds off with Kingston which saw around 625 units released to the market over the last 12 months. Greater Melbourne, Units in New Projects by LGA Last 12 Months 1, 9, 9,82 8, 7, 6, 5, 4, 3, 2, 1, 1,486 1,291 1, Melbourne Yarra Whitehorse Moreland Boroondara Stonnington Manningham Darebin Moonee Valley Kingston In terms of pricing across Greater Melbourne, the median one- and two-bedroom entry prices saw slight increases over the quarter to $365, and $489, respectively: a marginal increase of $5, for one-bedroom and $6,5 for two-bedroom prices from the previous quarter. In terms of size, 1 bedroom apartments saw marginal decreases in size from 47 to 46 square metres and two bedrooms decreased from 63 to 62 square metres for the median entry size. While, the median entry living area of one- and two-bedroom units for new releases is 47 and 62 square metres respectively: compared to 49 and 6 square metres respectively from the same quarter in 213. The following table highlights selected municipalities across Greater Melbourne, focusing on a number of key off the plan line items including total projects, new releases (for the quarter), percentage of projects under construction, price and internal area. oliverhume.com.au P.4

5 Greater Melbourne, Selected Municipalities QIII. 14 Municipality Projects Total Units QIII. 14 Launches and Total Units Median Units per Project % under Constr. No of Units. Median Internal Area 1 and 2 Bed. from Median Price 1 and 2 Bed. from Melbourne 68 18,1 8 1, % 1, sqm. $37, $497, Stonnington 31 3, % 2, sqm. $377, $565, Yarra 3 4, % 3, sqm. $417, $555, Boroondara 27 1, % 1, sqm. $385, $539, Moreland 2 2, % 1, 5 65 sqm. $345, $475, Darebin 2 1, % sqm. $332, $449, Port Phillip 18 1, % sqm. $385, $555, Whitehorse 18 1, % sqm. $325, $444, Glen Eira % sqm. $372, $516,5 Maribyrnong 13 1, % sqm. $348,25 $439, Manningham 13 1, % sqm. $359,5 $451,5 Moonee Valley 12 1, % sqm. $355, $47, Kingston % sqm. $351, $437, Bayside % sqm. $399, $539,5 oliverhume.com.au P.5

6 Oliver Hume Real Estate Group is the marketing agent behind more than 7, residential products along the eastern seaboard of Australia, representing Australia s leading public and privately listed companies. Oliver Hume Real Estate Group has successfully delivered more than 23 residential projects nationally. It has offices in Melbourne, Brisbane, Gold Coast and the Sunshine Coast and is active in land, medium density and high-rise market segments. Oliver Hume Research underpins the core of our business, and assures intelligent, strategic real estate decisions and evaluation. For further information contact: Andrew Perkins National Head of Research Oliver Hume Real Estate Group P F E a.perkins@oliverhume.com.au W oliverhume.com.au In 212 Andrew was elected to the UDIANSW s Land Release and Housing Delivery Committee. In 213, he was elected to the board of the UDIA in Victoria (UDIAV). Andrew is also a member of the UDIAV Membership committee. The information has been produced as a general guide and does not constitute advice. Whilst the information has been prepared in good faith and with due care, no representation is made for the accuracy of the whole or any part of the publication. No liability for negligence or otherwise is assumed for any loss or damage suffered by any party resulting from their use of this publication. The whole or any part of this publication must not be reproduced, mirrored or copied without written consent. Copyright Oliver Hume Corporation Pty. Ltd. oliverhume.com.au P.6