The property sector in Melbourne will help drive the nation’s economy, although the city faces a “chronic undersupply” of investment-grade property, a number of speakers at a property outlook seminar have said.
“Melbourne has closed the gap on Sydney and will continue to offer stronger growth potential over the next decade,” trend forecaster Bernard Salt said at the WBP Property Outlook breakfast meeting last week.
Mr Salt said new lifestyles, ethnicities and social behaviours as likely drivers of demand for well-positioned investment property in Melbourne’s inner and middle ring suburbs.
Speakers discussed the recent surge in market activity that is expected to increase in 2012, and the pivotal role this will play in Australia’s financial future.
“The city has experienced the second largest growth of all Australian capitals in the past five years at 7.6 per cent,” said CEO of WBP Property Group, Greville Pabst.
WBP Property Group provides property valuations, property management services and advice to prospective home buyers.
“Rents for housing have increased 10 per cent in Melbourne,” he said. “Yields will stay fairly consistent as property prices and rents track similar growth in 2012.
“In units, rents are not growing as fast because there is an increase in stock.”
Mr Pabst predicted that an oversupply of new high-rise apartments in Melbourne in the next decade, which will flood the market with “risky” investment properties.
“Melbourne has a chronic undersupply of investment-grade property. At any one time only five per cent of the properties on the market are investment-grade.
“Vacancy rates will increase dramatically and this is why we steer our clients away from this type of high risk investment.”
Melbourne recorded a residential vacancy rate of 3.5 per cent in January, according to SQM Research.