Melbourne’s CBD apartment sector has taken a battering during the city’s extensive lockdowns, but things seem to be looking up for weary investors.
During the peak of the COVID-19 pandemic and lockdowns, apartment owners were forced to sell at a loss, and vacancy rates soared to a 20-year high after one of the market’s biggest customers, international students, were shut out of the country due to border closures.
Research from CoreLogic reveals the number of available rental apartments has nosedived by 76 per cent since February. Increasing demand from tenants seeking affordable housing options drove the trend.
“In the past nine months, inner Melbourne’s rental stock had dropped from 7,890 in February to just 1,920 by the end of October,” the report stated.
"Since peaking in November last year, unit rental listings have been trending lower and are now 53 per cent below pre-pandemic level."
At the same time, the cost of buying property in Melbourne has skyrocketed by 13.4 per cent this year alone.
International students core market
Unlike other parts of Melbourne, the CBD is unique. International students and short-stay renters make up a significant part of its population - About 70 per cent of apartments are owned by investors.
Over supply helped drive rental and selling prices further south, as renters and buyers simply had an abundance of choice.
In April, it was revealed some investors had been forced to sell their apartments at a loss of up to 40 per cent, after the banks’ mortgage holiday ended and while Australia’s international borders remained closed.
The CBD apartment sector is frequently marketed as offering a cosmopolitan lifestyle of cafes and restaurants, shopping and international-grade sporting and cultural events. However, during Melbourne’s world-record six lockdowns, the CBD was labelled a “ghost town”, with foot traffic down by up to 90 per cent in some sections.
Both the state government and Melbourne City Council created plans to revitalise the CBD and encourage visitors back.
Australia recently reopened its international borders, however applications from international students have plunged by about 51 per cent, with Canada, the UK and the US becoming popular alternatives.