High vacancy rates in Melbourne set to linger in 2014

The Melbourne property market will continue to suffer from the knock-on effects of oversupply in 2014, according to a property research and investment firm.

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In its property market outlook for 2014, Aviate Group said certain pockets of Melbourne will be suited to property investment this year, but vacancy rates will continue to be an issue in various suburbs.

“From a metropolitan perspective, it’s hard to deny that the Melbourne market is moving to a state of oversupply, with the Docklands debacle perhaps the most obvious example of investors reeling from the concentration risk that goes hand in hand with high-density mass development,” Aviate managing director Neil Smoli said.

The vacancy rate in Docklands is currently 7.2 per cent, according to the report. Nearby markets of South Bank, Melbourne (postcode 3004) and Melbourne CBD (postcode 3000) also have high vacancies with 6.9 per cent, 17 per cent and 7.6 per cent respectively.

These figures “point to a substantial vacancy risk for investors” in these suburbs, the report reads. The broader rental vacancy rate in greater Melbourne is around three per cent.


Despite the largely negative outlook for Australia’s second largest city, Mr Smoli said investors could still succeed in Melbourne’s property market.

“An analysis of the fundamentals suggests investors should focus on perennial favourites in Melbourne, in particular those markets with long-term appeal that will continue to attract a quality calibre of tenant. St Kilda is the most prominent example,” he said.

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