Property group rejects ‘common wisdom’

Melbourne City

A property group has flatly rejected a common view of the Melbourne property market, casting doubts over housing values in Australia’s second-most populous city.

Omniwealth head of property research Luke Graham says media speculation has compounded the incorrect notion that Melbourne’s apartment market has reached saturation.

“We see it all the time, property investors scared off from a particular market because of a damning article highlighting the statistics of why not to invest in a particular city,” Mr Graham said.

“If you believe what you read in the media, Melbourne is currently suffering from an apartment glut. For those who dived into this market, either as an investor or owner-occupier, concerns over significant price reductions are palpable.”

However, Mr Graham said these concerns are unwarranted, pointing to the contrast between the suburbs of Docklands and Collingwood.

“[In Docklands,] rental vacancies exceed 10 per cent three times in the last half-decade, with the running average of the last ten years well into oversupply. The area’s sales and sales growth has not been assisted by significant foreign investment and questionable architecture being some of many factors limiting local appeal,” he said.

In Collingwood, just three and a half kilometres from Docklands, the apartment market is having a different experience thanks to urban renewal, Mr Graham said.

“Here, rental vacancies spend the majority of their time at undersupply levels, with the maximum of 4 per cent reached just once in the last decade and returning to undersupply in a matter of months.”

Cautioning against taking accepted wisdom at face value, Mr Graham said investors would be wise to think critically long-term.

“It is clear that there are some areas of Melbourne that have seen development focused on revenue rather than sustainable design. These areas have had a damning response from the local demographic,” he said.

“For today’s investor, an important principle to maintain is that you can save cents on poorly thought-out property today but it will cost you dollars when it comes to finding tenants and purchasers in the world of tomorrow.”

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