Melbourne’s high-rise apartment segment is clearly sick.
With Australia’s international border closed, and foreign students blocked from entering Australia, inner-city apartment rents have collapsed, falling by between 16% and 30% in the year to March 2021, according to Domain:
Inner-city apartment rents have collapsed across Melbourne.
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Charter Keck Cramer forecasts that in 2024 Victoria will build just 4 per cent of the number of apartments completed at the sector’s 2016 peak, when 19,400 were built…
The [UDIA] says developers are responding to the collapse in the market for central Melbourne apartments, driven by the closure of international borders to overseas students and tourists, by placing existing projects on hold and putting the brakes on new builds.
These forecasts seem overly bearish to me. While construction will no doubt fall further, the federal government will likely reboot immigration at the earliest possible opportunity, which will result in migrants flooding back into central Melbourne. This, in turn, will bring developers back into the market.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
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