Support for Melbourne’s apartment market and a reboot of the Postcode 3000 policy can both revitalise the CBD and rebuild Victoria’s economy, says the Property Council’s Danni Hunter.
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Three key takeaways:
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As Melburnians look for ideas to revive their CBD, the Property Council has put forward several proposals to the Andrews Government, outlined in its Pre-Budget Submission, to get the city bustling again.
“There are all-time high levels of stock overhang in the city and an estimated 4,000 apartments for sale or vacant today,” says the Property Council’s Victorian executive director, Danni Hunter.
Demand and supply dynamics have been “severely altered” by the pandemic. Median values of units in inner-Melbourne, for example, fell by an average of $33,313 between the onset of the coronavirus pandemic and January 2021.
Rents have also fallen, with yields declining from 6.3 per cent pre-COVID-19 to four per cent in December 2020.
“Short-term demand is very weak with the absence of international students and new migrants, and settlement and sales rates are significantly lower than historical trends.”
While strategies are required to address short-term oversupply and rebuild confidence, Hunter is worried a long-term undersupply will erode housing affordability.
Hunter points to research from Charter Keck Cramer, which shows that Melbourne’s apartment completions in the second quarter of 2021 will fall by an estimated two-thirds when compared to the same period last year.
“We must rebuild Melbourne’s reputation as a liveable and economically prosperous city and rebrand the central city as a desirable place to live, work and invest.”
This requires a two-phase response that addresses the immediate property oversupply and low demand for city property, and supports the property industry over the longer-term
Phase one would see a reboot of Postcode 3000 drive demand for existing city property. Postcode 3000 was a City of Melbourne planning policy that encouraged the development of apartments in the CBD. From roughly 600 apartments in 1992, the City of Melbourne’s residential population surged to nearly 30,000 over the next three decades.
Hunter says the “next iteration” of Postcode 3000 would include a plan for the full return of international students in 2022, stamp duty exemptions, a pause on the foreign purchaser duty and the removal of land tax on build-to-rent developments.
Phase two would support a pipeline of medium to long-term central city construction projects. Among these would be affordable housing that addresses the need for an estimated 23,000 extra homes in the City of Melbourne by 2036.
“Our aim is simple – to stimulate investment in Victoria’s property industry,” Hunter says.
“Property employs one in four Victorians, making it key to rebuilding the state’s economy. Increased investment our sector will boost tax revenue and employment, create housing choice and accelerate Victoria’s return to the epicentre of Australia’s economic growth.”