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Apartment Living on the High-Rise
December 4, 2014
While a home with a front and back door and a quarter acre block was once the great Australian dream, times have changed. With more Australians travelling, working overseas and experiencing life in high density cities, and new migrants from those cities settling here, apartment living is attracting increasing numbers.
As well, empty nesters and downsizers are swapping the suburbs and a high maintenance garden for life close to the action – apartments in Melbourne’s Docklands and Southbank, for example, offer the city’s restaurants, cafes and cultural life within walking distance, often with the added bonus of a river or bay view.
Apartment Rents Good News for Investors.
Such is the demand for apartments that many renters are willing to pay more for a good quality apartment than for an entire house. Agents report solid demand for inner-city apartments, which rent easily and command excellent rents – anecdotal reports borne out by the data.
REIV rental data for October shows that the Melbourne median weekly rent for a three-bedroom apartment was $466, up two per cent since the start of August – compared to a weekly rental of $420 for a four-bedroom house, and $371 for three-bedroom homes.
The difference was greatest in inner Melbourne – that is, within 10 km of the CBD – with three-bedroom apartments there now commanding a median weekly rental of $610, an impressive 4.8 per cent increase in the past three months. The median $353 rent for a one-bedroom apartment there was also up on the previous month, while the two-bedroom median rental was stable at $440.
REIV quarterly median rent data, based on the 12 months ending the September quarter, provides more detailed information about specific parts of the city.
It shows that the median rent for a three-bedroom Docklands apartment is now $903 a week – up 0.4 percent on the previous quarter and a healthy gross rental yield of 4.7 percent. For a Southbank three-bedroom the weekly rental of $720 was up 2.9 per cent on the previous quarter and the yield, 4.9 per cent.
The news for investors was even better for one-bedroom Docklands apartments with the weekly median rent of $447 up 3.6 per cent on the previous quarter and the gross rental yield a healthy 5.8 per cent. For Southbank the comparable figures were a stable $420 median rent, a yield of 5.3 per cent.
The inner Melbourne rental for houses, meanwhile, averaged $540 a week, a slight decrease on September as Melburnians appeared to opt for the convenience of apartments in the second half of this year.
Capital Growth Also an Inner City Success Story
Inner-city apartments are also showing solid capital growth for investors, despite dire predictions at the start of the apartment building boom in the CBD and environs about oversupply.
REIV research also shows that over the past 10 years the median price of a two-bedroom apartment in the CBD and nearby St Kilda Road increased by 43 per cent, from $4434 per square metre to $6353 per square metre. One-bedroom apartments were not far behind, increasing by 34 per cent, from $4551 per square metre to $6117 per square metre.
Three-bedroom Docklands apartments have now joined the million-dollar club, with a median price of $1,005,000 at the end of the September quarter, while a three-bedroom in Southbank, with a median of $759,000, was up 4.7 per cent on the previous quarter.
As the number of new build apartments within 10km of central Melbourne continues to grow, both renters and buyers are realising apartments offer convenience and an increasing range of amenities.
Many of these rental apartments are new or near new, offering the latest in interior design and state-of-the-art kitchens and bathrooms. And as developers realise many apartment-dwellers want more than just the basics, city blocks are delivering shared facilities such as home theatres, resident dining rooms and bars, gyms and pools, even communal vegetable gardens tended by the residents and managed by the owners corporation.
For investors apartments have been shown to offer excellent long-term capital growth, with rental income covering outgoings, or partial outgoings to allow for negative gearing. The Melbourne apartment market remains strong with demand from young renters and buyer demand from both investors and baby boomers seeking a change of lifestyle.
About the author: The Chief Executive Officer of realestateVIEW.com.au, Enzo Raimondo is an authoritative source of information for the Victorian property market and is now the vision of the industry owned real estate listing portal – realestateVIEW.com.au