Unprecedented growth in Melbourne's inner-north has resulted in many developers turning over assets in as quickly as six months, realising capital growth of up to 50%.
The area's growth has been, according to industry experts, driven by the heightened demand for student housing and the plot-ratio restrictions in the CBD, as well as an exceptionally increased population growth rate that Melbourne has not experienced since 2011.
“The recent census data reveals how Melbourne has emerged as the fastest-growing city in Australia, growing by 2.4%, well above the national average of 1.5% in the same period," Colliers International’s Oliver Hay said.
“The precinct in focus is, for the most part, to the south of the University of Melbourne – however, the demand has spread right through to West Melbourne and North Melbourne."
Hay, together with Colliers International’s Daniel Wolman, have facilitated several freestanding transactions including 688 Elizabeth Street in mid 2015 – one of the earliest transactions to benefit from the change in market conditions.
“It was only 18 months later, when a permit was secured for residential redevelopment, that the site was on-sold amid insatiable demand to realise a 50 per cent uplift in value,” Hay said.
“The demand we’re experiencing is indicative of the burgeoning low-rise student precinct.
“The presence of surging Chinese and Indian migration is also particularly evident, as illustrated in the census, which reveals Victoria’s 71 per cent increase in Chinese and 51 per cent increase in Indian population since 2011.
“Melbourne is streaking ahead as the premier destination for lifestyle, employment and tertiary education.” Hay said.
Similar student accommodation development motives have been observed behind the sale of other freestanding properties, including the permit-approved 100 Bouverie Street, Carlton, which sold last month for $2.8million, a 93% premium on its 2014 purchase price.
“With developers seeking more profitable projects outside the CBD grid, each property is expected to be well received by the market,” Wolman said.
“In comparison to the CBD grid, land rates in the city’s north rarely break $20,000 per square metre, creating considerable and flexible redevelopment opportunities, and consolidating the continued densification of the city’s north and its future relevance as the gateway to the CBD.”