Housing is a necessity in Melbourne. As the population continues to swell, so must housing supply.
Perhaps the easiest measure of how deserving Melbourne is of the World’s Most Liveable City title for the 7th consecutive year, is its increasing population growth. That, and the fact that it is perhaps the most populated state capital city in Australia, with 75% of the population of the entire state of Victoria living in Melbourne city alone.
In 2016, the Australian Bureau of Statistics (ABS) reported Melbourne as having the most epic population growth of any Australian city, making up almost a third of Australia’s population growth. The contrast is quite significant, with 2.4% in Melbourne compared to 1.2% in the rest of Australia.
Australia’s population growth is faster than many OECD countries including Malaysia, Philippines, Singapore and the UK. Image source & credit: ABS(For the record, Australia’s population growth is faster than many OECD countries including Malaysia, Philippines, Singapore and the UK. This is an interesting fact because a developed nation’s growth is typically slower than that of a developing nation, hence property prices should grow faster in a developing nation. Australia, however, is the exception.)
In ABS’ latest report, Melbourne (Victoria) continues to headline the country’s population growth of 388,100 people, with an increase of 2.3% year-on-year.
But first, a short lesson in geography: Melbourne, with its population of approximately 4.8 million people, comprises the broader metropolitan area (also known as Greater Melbourne) as well as the city centre. Altogether, it consists of 31 municipalities.
However, this article specifically refers to the city of Melbourne which encompasses the Melbourne CBD, Southbank, Docklands and many of the suburbs in Melbourne’s inner city.
As of 2016, the estimated residential population in the municipality of the City of Melbourne was 151,176. A whopping approximate of 903,000 people people were recorded as having travelled to, or were present in the municipality on an average weekday in that same year, an increase of 6% from 2014.
Statistics in the City of Melbourne’s Daily Population Estimates and Forecasts reveal that expansion in the city will continue, and is expected to hit 266,455 residents by 2037 due, largely, to births and immigration. According to projection estimates, there will be over 1 million people in the city on an average weekday within the next 5 years, and 1.4 million by 2036.
Recently, BIS Oxford Economics predicted that Melbourne is headed for an undersupply in housing. What makes this especially noteworthy is the fact that it was a complete reversal of its earlier prediction that the city would suffer a surplus of apartments! The consultancy has based its forecast on census figures that show Melbourne had 109,000 more people than previously expected.
“We thought it would get to a 20,000 excess (of apartments) in Victoria by 2018. We’re now saying in 2018, the market has still got an undersupply of about 2000 dwellings. We’re talking a 20,000 turnaround,” said BIS managing director Robert Mellor.
Spiralling Growth in the CBD
Figures by the ABS show that between 1991 and 2016, the population living within 10km of the CBD grew by 40%, from 743,000 to 1,042,000.
Melbourne’s CBD has also seen spectacular growth; with its population swelling from 1611 in 1911 to 15,249 in 2006 and 35,447 in 2016.
The increase in population is reflected by a sharply-tightened vacancy rate of 1.7% and 1.4% for apartment units and houses at as recent as Q3 2017.
According to Mellor, census figures show that the proportion of students rose to 27% demand for inner city apartments in 2016, from 20% in 2011. Students comprise a key demographic occupying apartments in the CBD, where Melbourne’s high-rise supply has been concentrated.
According to SQM managing director Louis Christopher, the last time the figure slipped as low as 1.7% was in June 2007.
“This is quite remarkable — despite predictions of looming apartment oversupply in inner-city Melbourne, we are seeing vacancies fall rather than rise,” he said.
“Even in the Docklands the vacancy rate tumbled to just 2.4% (as at July 2017), down from a high of 6% in December.”
The tight vacancy rate is good news for landlords, especially if seen from the perspective of future population growth.
By 2037, the CBD’s population is expected to reach 76,982, 44% higher than the population in 2017. Interestingly, this growth forms 29% of the total projected population growth of the City of Melbourne within the same time frame — a significant percentage, particularly if you consider that the CBD spans an area of about only 6.2km2!
In terms of age, the CBD population will be dominated by the 25- to 34-year-olds, followed by the 35- to 44-year-olds by 2037. Logically and based on current property prices, the 25- to 34-year-olds represent the demographic that is most likely to rent a property.
Meanwhile, housing looks set to increase too, with the number of private dwellings projected to grow to 56,838 in 2037, compared to 25,321 dwellings in 2017.
Back in the day, the CBD was probably last on a laundry list of choice residential areas, but this trend is changing. While the CBD may not be the cheapest area to live in Melbourne, there is a growing community of residents.
What will continue to draw the crowd and keep the CBD alive, are its industries and jobs, and its proximity to universities, festivals and the arts, food and beverage, services and retail.
Article by Vivienne Pal
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