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Overview of Brunswick Residential Market | Charter Keck Cramer

Independent property consultants and valuers Charter Keck Cramer have prepared a report profiling the Brunswick residential market. The report provides a demographic and socio-economic profile, apartment demand and supply analysis and forecast outlook for the Brunswick area.

Key findings in the Charter Keck Cramer report are:

• Location - Brunswick is undergoing a dramatic facelift, with conversions of factories and warehouses and new residential developments. The area enjoys unprecedented residential rental occupancy levels with quality tenants. There is a particularly large pool of tenants in Melbourne, which ensures rental demand stays strong and occupancy levels remain high.
• Demand - It has been clearly established that residential properties in Brunswick have experienced strong underlying demand, which is evidenced through rising prices and the continual delivery of new and higher quality projects.
• Vacancy Rates - The effect of sub 2% vacancy rates (currently approximately 1% in the inner Melbourne suburbs) should continue to manifest in strong rental increases so as to increase overall returns to property owners.
• Rents - The prevailing situation of relatively little new supply identified for delivery in 2008-2010 will further exacerbate the situation and underpin rent growth in Brunswick.
• Yields - Based on stable price growth and increasing rents, yield has improved to 5%. There is the expectation of improving yields over the short to medium term as price growth lags the increase in rents, along with a tight vacancy situation wherein near full occupancy is expected.
  

Melbourne Apartment Market Profile | Charter Keck Cramer 

In a Market Analysis and Summary – Medium Density Apartment Market report dated 9 October 2008 prepared by independent property consultants and valuers Charter Keck Cramer, it was noted that the Melbourne medium density apartment market is maturing at an unprecedented rate, segmenting into various sub-markets with clearly delineated purchaser and occupant profiles. Successful "marquee" contemporary projects embrace the needs of target residents and reflect a "whole life" concept, providing a fully integrated lifestyle not apparent in previous offerings. Such projects are strategically placed to capture a clearly defined purchaser and occupant profile, mitigate marketing risk and provide an opportunity to extract capital and rental value premiums relative to competing projects that do not reflect contemporary requirements.

Over the past decade there has been a fundamental change taking place in the provision of inner urban residential housing in Melbourne, driven by:

• Substantial population growth and higher migration, particularly from Asia
• Growth in the number of overseas students
• Chronic housing undersupply which is expected to continue to worsen
• Urban consolidation policies of government – Melbourne 2030 Strategy
• Historically low vacancy rates for rental properties – currently approximately1%
• Increasing rents and rental yields maintaining investor interest
• The move of textile and other inner city manufacturers overseas as Melbourne becomes more a logistics hub, thereby freeing up infill sites for development
• Higher multiples of earnings now required to acquire housing
• Acceptance of apartment living
• Generation Y and X move to longer term renting and inner city living
• Absence of affordable housing options
• Higher private transport costs and traffic congestion
• Rejuvenation of inner suburbs, with access to existing amenities, shopping, worksites and infrastructure
• Greater focus on the environment and sustainability
• Significant stamp duty savings for ‘off the plan’ new apartments
  

 Melbourne has traditionally evolved as a “suburban” rather than “urban” city but in a reversal of historic development patterns, the Melbourne 2030 strategic planning framework aims to encourage higher density housing within inner suburban activity centres at the expense of fringe greenfield estates.

Policies encouraging higher density inner urban have only marginally slowed the expansion of the urban fringe, but a more efficient use of the existing infrastructure and services has resulted in a revitalisation of inner urban commercial centres and had a marked impact on the nature and location of inner city development.

Increased development and project density surrounding activity centres and established lifestyle precincts is a key objective of the Melbourne 2030 strategic planning framework. Although the Melbourne 2030 vision is driven by preferred planning outcomes, it is the market that has responded to the changing preferences in household nature and location, most comprehensively around inner urban precincts with proximity to facilities and amenity that complement a contemporary lifestyle. Well located quality development sites capable of varied redevelopment propositions are sought after by focused developers who are aware of the drivers of the medium density development market.

Housing markets are becoming more diverse, as evidenced by the increasing popularity of apartment living on the one hand and the move by baby boomers to semi-rural sea-change/tree-change locations on the other. Nevertheless, residential preferences are largely underpinned by a common set of factors that relate to housing needs, social/cultural norms, demographic/socio-economic characteristics, household/family structures and lifestyle. Changes in these factors suggest that suburban residential apartments will become an increasingly suitable housing choice for diverse market segments, but primarily still focused upon couples and singles rather than families. The primary reasons for the increased suitability of suburban apartments relative to established detached housing include - lower maintenance; greater energy efficiency; less costly to occupy; enhanced security; typical location within proximity of established social and physical infrastructure; and incorporation of contemporary living standards.

Melbourne's population growth and emerging demographic trends are expected to continue to drive strong demand for non-detached dwellings in both the apartment and townhouse form. Population growth in Victoria has continued to strengthen in the last three years. A net gain of 82,430 in population was recorded in the year to 31 December 2007, a growth rate of 1.6%. Both were at record levels. The key driver remained record levels of immigration. Net international migration accounted for just over 49,000 people in the year. However, natural
increases were also at record levels, growing by 36,513 in the year. This exceeds the previous record in 1990 of 35,984.

Melbourne currently has the lowest vacancy rate for housing of any of the larger metropolitan cities of just 1.0%. This is the lowest in 25 years and compares to the long term average of 3.3%, which is accepted as representing close to the market’s equilibrium point. This doesn’t look like changing in the near future and rents are expected to continue to increase. According to Residex for the year to 30 November 2008 average rents for apartment units in Melbourne grew by 11.86%, with capital growth of 17.86%.