Melbourne house premium driving apartment growth


The price gap between Melbourne houses and apartments has ballooned since 2014. But now, the apartment market is playing catch up, off the back of accelerated capital growth and an ever-growing population.

Melbourne: apartments vs houses

Apartments currently offer a significantly affordable alternative to a detached house in Melbourne.

According to the latest figures from Corelogic, Melbourne houses attract a premium of 49% compared to apartments –  the highest premium out of all the 5 major capital cities in Australia.

Melbourne house premium

Over time, the house and apartment price gap has ballooned, rising from $54,000 to $286,000 over a 10 year span. Most of that growth occurred in just the last 4 years.

In recent times, however, we’re seeing Melbourne apartments begin to catch up – with the gap flattening out over the first half of 2018.

Melbourne house and apartment price gap

property investment melbourne

Source: CoreLogic July 2018

“We expect the price gap to narrow further in time off the back of accelerated growth in apartments and more moderate growth for housing, particularly for properties over $800,000,” said Ironfish Head of Property, William Mitchell.

Melbourne apartments – highest capital growth

Over the 12 months to June 2018, Melbourne apartments delivered the strongest rate of capital growth, outperforming all major capital city apartment markets by a significant margin.

Apartments – annual capital growth

Melbourne apartment rental growth has similarly been very strong rising by almost 4% over the 12 months to June, translating to a $16 per week increase.

Melbourne – oversupply or undersupply?

Melbourne continues to record some of the tightest vacancy rates in the country, sitting at only 1.6%.  Despite concerns of an oversupply, Melbourne’s vacancy rate in fact indicates a significantly undersupplied market, characterised by strong rental demand.

These tight figures correspond with Ironfish Property Management team as well, which has similarly reported a very low vacancy rate of only 1.2% in the Melbourne CBD for October 2018.

Ironfish property investment melbourne

Prospective tenants queue out the front gate at the first inspection at “Kings Domain” in South Melbourne

Forward projections of Inner Melbourne supply show a significantly reduced pipeline of new housing; adding further pressure to rental growth from Melbourne’s growing population.

Australia’s fastest growing capital city

In FY2017, Melbourne was crowned our fastest growing capital city, adding an impressive 125,000 in this time.

Population growth FY 2017

The Victorian capital is set to overtake Sydney as Australia’s biggest city in the not-too-distant future in terms of population. In terms of economic performance, Victoria has already toppled NSW – coming in first in the latest CommSec State of the States report – driven largely by Melbourne.

property investment melbourne sydney

The Greater Melbourne area added over 80,000 jobs over the 12 months to August 2018, with the current infrastructure boom driving a substantial portion of this jobs growth. Big budget Melbourne projects include the $11 billion Metro Tunnel, $15 billion Airport Rail Link and $2.3 billion High Capacity Metro Trains.

“When you compare the cost of houses vs apartments in any of the other major cities in Australia, it becomes quickly evident that Melbourne apartments are currently great value for property investors. As Melbourne’s population continues to boom driven by a nation-leading economy and strong jobs growth, and new supply of apartments into the Melbourne market diminishes, it is clear to see what the future holds for the Melbourne apartment market. The key is identifying the right areas and property to invest,” Mr Mitchell added.

Ironfish property investment – Melbourne apartments

Our property and research team have identified a select list of premium Melbourne apartments. If you’d like to view our list, simply register your details here.

You can also view our Melbourne property market update below:


More articles

Want to stay ahead of the rest?

Subscribe to our monthly newsletter: all the major property news, research, insights, strategies and investor stories in our monthly newsletter.

Contact us
Employment Enquiry
.docx,.rtf,.doc,.pdf fiel extensions are only allowed.
.docx,.rtf,.doc,.pdf fiel extensions are only allowed.