Concerns about the glut of apartments hitting Melbourne’s inner city property market would appear to be vindicated by the significant rate of losses incurred by vendors last year.
New data indicates that nearly a fifth of property resales within Melbourne’s inner city area incurred losses for vendors during the December quarter of 2014.
According to CoreLogic RP Data’s most recent Pain and Gain Report, a total of 17.3 per cent of resales in the City of Melbourne local government area were loss-makers in last year’s final quarter.
This figure makes the City of Melbourne the one part of the greater urban area with the highest loss-making rate during the three month period.
The City of Melbourne covers an area of approximately 36.2 square kilometres at the heart of Melbourne, encompassing the CBD and a sizeable swathe of surrounding suburbs, including Carlton, Docklands, Jolimont, Kensington, Parkville, Southbank and West Melbourne.
It also includes parts of Carlton North, Flemington, North Melbourne, Port Melbourne, South Wharf and South Yarra.
The area was also the one part of Melbourne that posted the largest total losses from property resales in the final quarter of 2014, with the figured estimated to be in excess of $4.5 million
Loss-makers in the inner city skewed heavily towards short-term owners, with those vendors who incurred negative profits holding their properties for 5.6 years on average. The median loss for resales in Melbourne City during the quarter was $27,350.
Profit-making vendors held on to their properties for far longer by comparison, with 82.7 per cent of them only selling after an average of a decade of ownership.
Despite the high percentage of loss-incurring resales in the inner city, the rewards reaped by profit-makers were exorbitant. The median gain of profit-making sales was $152,000 in the December quarter, for total earnings of $108,107,048.
Melbourne’s inner city real estate market could be further hampered in future by the large number of residential property developments currently in the pipeline as a result of the Napthine government’s efforts to facilitate the approvals process during its tenure office.
Members of Melbourne’s property sector have been complaining about the city’s glut of new apartments and the potential for this to lead to oversupply and a spate of loss-incurring resales since the middle of 2014.
Knight Frank research director Richard Jenkins said Melbourne is set to see the biggest annual supply of apartments over the next couple of years, driven primarily by offshore developers.
Nearly 6,000 homes are set to be completed in the Melbourne Inner City Area this year – a rate which is nearly three times the annual average for the past decade.