Ultra-Wealthy’s Luxury Apartment Migration Gains Pace in Melbourne

Toorak, Melbourne’s most exclusive suburb, made headlines last month as the home of the city’s first $100-million mansion—the eight-bedroom Cranlana on Clendon Road, owned by the Myer family, and on the market for the first time in a century. But there are other moves afoot in the blue-ribbon suburb 9km south-west of the CBD, notably a migration among the ultra-rich to apartments, including Orchard Piper’s Toorak Village. “There has been such a huge growth in prestige housing prices,” Orchard Piper director Luke McKie tells The Urban Developer . “That gap between prestige housing and luxury apartments is widening. If you sell a luxury home you can easily afford to buy a transition apartment.” Bucking the trend According to Domain, a median three-bedroom unit at Toorak will fetch $1.9 million, while a three-bedroom house has a median price of $3.45 million. Home prices at the top end of the market have grown in contrast to Melbourne house prices. Despite a 0.49 per cent rise in October (which was 4.16 per cent below the October, 2022 peak) prices in the Victorian capital declined every month in the six months to October, according to PropTrack. Greater choice and higher property taxes have been blamed. Toorak Village, meanwhile, celebrated a record $12.5-million apartment sale last year , while the average price so far for the building of nine apartments is just over $9 million. “It’s close to the highest average price in the country, and in Melbourne for sure,” McKie says. ▲ Orchard Piper directors Luke McKie and Rick Gronow. It equates to an average $34,000 per square metre, he says. “The luxury market is very much its own beast,” McKie says. “Because of that incredible growth in freestanding [high-end] house prices, the trade from inner-city suburb to luxury apartment has never been a more obvious choice.” But there is a huge concentration of ultra-luxury homes and apartments in Toorak, in marked contrast to Sydney , he says. “Sydney has about 20 Tooraks, but Toorak is our number one suburb, with extreme wealth concentration in one postcode.” ▲ According to Domain, the average house price in Toorak is $4.5 million, an annual 16.3 per cent decline but a five-year 16.9 per cent lift. It’s also primed for apartment development, with large landholdings, close to the city, the river and the freeway. But finding or indeed creating sites is no mean feat. “The best sites are often held by the people who don’t need the money that much—and you can’t underestimate the sense of pride and legacy some of the landowners feel,” McKie says. “But we’ve been developing in Toorak for 15 years and when you have a long-term reputation, the decision for people to work with us on land sales and also commit to off-the-plan purchases is a lot easier.” Changing needs of the ultra-wealthy Toorak Village, designed by Kerry Hill Architects in its first foray into Melbourne, has nine three-bedroom apartments on offer, amenities that include private lobbies and a 24-hour concierge, and is winning the attention of downsizers. “Most of these buyers buying luxury are ‘stage of life’ buyers—they’re not necessarily driven by economic circumstances,” McKie says. “The driver is their life circumstances, whether that means house maintenance is becoming a problem or they want to start travelling.” ▲ In contrast to house prices, the median unit prices in Toorak is $915,000 according to Domain, a decline of 15 per cent over five years. Luxury apartment buyers are less affected by the economic conditions, such as the Victorian Government’s move to extend stamp duty discounts for off-the-plan units, apartments and townhouses, but that’s not to say that they are immune to economic wobbles. “The rest of the market is in a tricky spot—there’s a lot of indigestion ... people who bought properties over the past few years had not anticipated the interest rate environment could change and that caught a lot of people out,” McKie says. “The luxury end isn’t insulated, although it’s certainly a long way ahead from feeling the effects of daily economic drivers.” Hitting the market Next year will be one of major completions for Orchard Piper, including with Toorak Village. It is on track, McKie says, with Cobuild handling the build, the first partnership between the two firms in an increasingly risky construction market, even at the luxury end. The developer dealt with this “with a really high level of documentation and pre-contract discussion”, McKie says. “Our contracts are generally tight due to the amount we spend on that documentation, there’s not a lot of room for change and builders can get a good accurate subcontractor pricing package. “The risk turns to the builder so they manage subcontracts more so than development, we’re within 0.4 per cent [of the Toorak Village contract price] right now. ▲ Toorak Village is due to finish construction in the third quarter of next year. Just two apartments are unsold. “This has always been the way we’ve worked, because we needed to provide resolution to customers in off-the-plan sales ... people will do their own research and you can’t underestimate how investigative the buyers are.” Meanwhile on St Kilda Road, the developer’s Carter Building project has come to market with 200 registrations of interest for the 10-storey, 54 apartment project. The residential component will sit above a five-star hotel for an ultra-serviced offering that has only been successful on the city once or twice, according to McKie. And its East Melbourne project is also due to complete next year while another Toorak development for which it filed plans last year will be launched to market. “Really it’s a very simple supply-and-demand equation,” McKie says, “and there’s no way to go other than up.” You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

Ultra-Wealthy’s Luxury Apartment Migration Gains Pace in Melbourne

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