Investors Outnumber Owner Occupiers in Apartment Market Across Melbourne.

Investor purchases have driven the proliferation of apartment numbers across Melbourne in recent years. The Melbourne skyline is dotted with new Apartment developments and cranes still dot the skies.

Recent research by Australian Universities and the Strata Community Association shows that 50% of the apartment market is owned by investors and tenanted out, whereas only 25% of apartments are owner occupied – either outright (11%) or with a mortgage (14%).

The need for developers to get finance could be a major driver of this. Developers need finance before they can start building their apartment blocks. In order to get finance from a bank, unless a developer is cashed up already, they need to prove interest to a financier. This means they offer their apartments through off the plan sales. Off the plan sales are generally more appealing to investors than owner occupiers. 

The data shows that Victorian homebuyers have not embraced apartment living. The data shows that only a quarter of Melbourne’s apartments are occupied by their owners. 

The report shares some interesting insight on who is living in apartment complexes. 8% of Victoria’s population live in apartments. The vast majority of apartment dwellers live alone (39%) and are younger aged. 57% of apartment dwellers in Melbourne are aged 20-39. Young professional couples with no children make up the next 27% of apartment dwellers. 70% of apartment residents in Melbourne are young professionals without children. 11% of apartment households are group households 9% are families and 5% of apartments are occupied by single parents.  

Interestingly, the majority of Apartment dwellers in Melbourne were born overseas. Only 42% of Victoria’s apartment dwellers were born in Australia. Of the other 58%, a significant number were born in China (8%) and India (6%.) This may suggest that many Australian born citizens have not moved away from their childhood of growing up on a quarter acre block in the suburbs. 

It also indicates that new migrants, on arrival in Australia, first seek access to affordable rental homes close to public transport, study and employment opportunities. Apartments often fill this opportunity. 

Whilst owner-occupied apartment living may not have been fully embraced by Melbournians, the proliferation of Strata Properties across Melbourne does offer unique insight.

Since 2015, there have been more attached properties built than detached properties. Victoria is driving this growth. The majority of these properties have been smaller townhouse developments – 2-3 on a block that may have previously had one property. The proliferation of these properties, and the proliferation of stratas to help manage this has been largely driven by governments, at many levels, developing policies to build up rather than continue to build out. Population growth has led to the proliferation of townhouses enabling families to live closer to amenities – work, education, shopping, recreation and entertainment. These townhouses have been more appealing  to owner occupiers than apartments have been. 

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