The latest findings from property consultancy Urbis revealed that apartment sales in Melbourne indicated a slowing of overall sales volume from levels seen in the previous year.
Prices climbed compared to the previous quarter in the inner north and inner west precincts, whilst dropping in the central, inner east and inner south precincts.
“Prices tend to move around on a quarterly basis due to variation in stock, so we have not seen evidence of a pullback in pricing,” Urbis Director of Property Economics and Research Mark Dawson said.
“This is more a function of luxury sales in the previous edition.”
Of the projects surveyed to create the data for Urbis’ report, around one-quarter sold six per cent of their total volume in the quarter. Stripping out those projects that had already met presales targets, those in full-swing marketing achieved an average of over 10 per cent stock sold in the last three months of 2016.
Mr Dawson said that the latest research figures gave a fair reflection of the conditions in the market – “supply volumes are starting to scale back as financial and regulatory measures apply the brakes”.
He said it had a dual impact upon sales volumes in the short term, but well-designed projects will continue to appeal to a sizeable market.
“Future launches will give a more genuine indication of market appetite for central city projects, since there has been some easing of momentum at the tail end of major projects.
“Sales volumes have held firm in precincts outside the central city, yet continue to remain modest in the context of central city volumes over the last two years.
“Successful suburban projects are delivering similar sales numbers on a quarterly basis compared to central precinct projects, as market appetite continues to spread to the suburbs.”
According to Urbis, the weighted average sales price for inner Melbourne in the December 2016 quarter was shy of $658,000, offering some hope to first-time home buyers.
Thirty-five per cent of projects had a weighted average sale price below the $600,000 mark and would be eligible for stamp duty exemptions under the new thresholds in place from July 1, 2017. A further 45 per cent of apartments would qualify for the sliding scale up to $750,000.
Mr Dawson said he envisaged a boost to short-term sales volumes in the first half of 2017.
“We’d usually expect to see some uptick on the back of Lunar New Year followed by the effects of a race to the finish in Q2 as efforts to boost investor sales ramp up in advance of the stamp duty concession changes on July 1.
“This will coincide with some big projects that are ready to launch and those that are being fast-tracked so would expect a further kick in sales in the central precinct.”
Urbis said the short-term supply boost will be offset by continued slowing of the approvals velocity.
“This continued downward step from the 2015 peak follows the pincer movement of tighter planning in the central city, erosion of tax incentives and the continued tightening of both project and purchaser funding.”
Although the Reserve Bank of Australia has again opted to keep the official cash rate unchanged at 1.5 per cent, several banks have opted to increase rates independently as well as restricting investor lending for apartments.
Mr Dawson said that future absorption from record population growth, tightening of rental vacancy rates amid increasing housing affordability issues and government policy will present further opportunities for apartments.
“Whether purchased or rented, there is continued dwelling demand where the jobs are and Melbourne is well placed in that sense, but it will take time to see the full combined impact of first home buyer concessions, investor restrictions and supply moderation as the various policy, regulatory and market levers are pushed and pulled.”