Demand remains strong for Melbourne residential

Residential demand in inner city Melbourne is forecast to increase in the decade to 2031 as the transition to smaller households intensifies, says DTZ Research.

DTZ Research reports that $2.6 billion was invested over 2014 in residential development sites in Melbourne’s CBD and inner-city fringe market across 171 transactions.

Melbourne residential development strategies reveals that offshore investors committed just over $1.0 billion (40 per cent) across 47 transactions.

“Average deal size of overseas investors, at an average of $22 million for the year, was consistently larger than their domestic counterparts who registered a volume of $1.5 billion at an average of $15 million,” said the report’s lead author, Dominic Brown.

Pricing of CBD sites increased strongly in the second half of 2014, while pricing of sites in non-CBD locations was largely flat over the year.

DTZ estimates that there will be demand for between 20,000 and 47,000 units over the period 2015-21.

“Demand is forecast to increase in the decade to 2031 as the transition to smaller households intensifies,” Brown explained.

The report outlines three scenarios. At its maximum there is a total supply of approximately 93,000 units across 575 projects; however not all these projects are likely to proceed, and industry estimates expect up to 43,000 units to be completed over the next five years.

“Many units will be sold to offshore investors and so will not be available to meet local demand. Under current assumptions, there is sufficient supply of projects at all stages of the development process to meet underlying population demand for approximately the next decade,” Brown said.

“Despite the current pipeline, there appears to be no weakening in demand for development sites from investors,” Brown concluded.

To read the DTZ Research Melbourne residential development strategies click here