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Strong market conditions are expected to entice investors into inner Melbourne’s apartment market towards the end of 2009.
Low interest rates and exceptionally low vacancy rates are driving rents and rental yields higher, BIS Shrapnel’s Inner Melbourne Apartments, 2009-2016 report showed today.
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According to BIS Shrapnel, Melbourne’s vacancy rate is hovering at around one per cent. Coupled with a shortfall in new apartment construction, investors should be able to lock in rental increases of between 5 and 10 per cent per annum for the coming years.
BIS expects these returns will drive strong investor activity but not until confidence returns.
“Investors currently remain reluctant to re-enter the market and purchase off-the-plan apartments,” said BIS Shrapnel senior project manager Angie Zigomanis.
“Residential prices declined over 2008 and although there have been signs of stabilisation in 2009, we believe that investors need to be confident that prices have bottomed out and growth is returning before they dip their toe into the apartment pool.”
As a result, BIS expects investors to show signs of life towards the end of the year with demand to subsequently pick up over 2010 and 2011.
