Property analysts Charter Keck Cramer believe the so-called "oversupply" of inner city residential property is a media created myth.
In its latest report on Melbourne’s inner city apartment market, Charter Keck Cramer state that the new apartment market has been waylaid by fears of an over development of units especially in the Docklands and Southbank precincts.
“The impact of this continued attention has certainly detrimentally impacted on short-term purchaser sentiment,” says researcher Robert Papaleo. “However, this may prove to benefit the long-term sustainability of the market by preventing further overheating and a future excess of unsaleable apartments.”
Papaleo said the ‘built up’ pressure in the inner city market has removed a number of inexperienced developers from the market and thwarted unviable and poorly located apartment projects from progressing.
Papaleo’s research found there was no oversupply of completed apartments relative to consumer demand.
Charter Keck Cramer found that there was, however, increasing pressure on the inner city apartment rental market with rents have dropped on average five% in the last 12 months.
City agents believe average rents of around $350 a week for a two bedroom apartment could fall a further 10% over the next 12 months with Dockland apartment rentals falling from an expected weekly return of $400 a week to around $375 per week for a two bedroom unit.
One agent quipped: “At the moment, if we can find a good tenant willing to make a reasonable offer on an apartment the owner is usually willing to take a $50 per week cut just to get the 12 month lease deal.”
“Investors are looking at 4% returns at best on rental properties at Docklands,” he added.
