MELBOURNE'S PROPERTY MARKET - still providing value for investors

Melbourne’s CBD office market has been one of the best performing in the Country and continues to have one of the most affordable residential markets. The City of Melbourne’s annual Property Watch Report shows Melbourne’s office market remains an attractive investment because of its ability to offer affordable leasing options in comparison to other capital cities.

The research also indicates that the Docklands office market performed well during the last six months with vacancy rates for office space decreasing from 10 per cent to 3.9 per cent, despite supply additions.

The report which summarises current industry views also shows Melbourne’s distinct laneway culture continues to thrive with demand for retail laneway tenancies increasing and vacancy rates decreasing.

However, the annual update of office, retail and residential property markets in the City of Melbourne confirmed that the downturn in the Australian economy is likely to put pressure on all markets, particularly in the retail sector.

Lord Mayor Robert Doyle said the report was useful in helping businesses and individuals to understand current and short-term prospects for key sectors of Melbourne’s property market.

“Melbourne’s property market remains in a relatively strong position despite the impact of the financial crisis on individuals and businesses.

“As we head into even tougher economic times it is important for the City of Melbourne to continue to work hard to attract investment from businesses, retailers and individuals,” the Lord Mayor said.

The City of Melbourne found that demand for rental properties continued to outstrip supply in 2008 pushing rents up and keeping vacancy rates at record lows. Vacancy rates in the fourth quarter of 2008 were reported at 1.2 per cent and this is expected to remain unchanged over the next 12 months.
The report found that Melbourne’s CBD office market vacancy rate increased from 3.1 per cent to 4.8 per cent in the six months leading up to January 2009, however this increase was largely due to supply additions to the market.

Significant supply additions are forecast for 2009 and 2010, largely Supported by pre-commitments from government as well as educational, banking, insurance, legal and consulting firms.

Figures show that retail spending growth slowed in Victoria throughout 2008 to just under 5 per cent, but this figure compared favourably against
other states.

Industry forecasts indicate an even slower 2009, with nominal sales rising by just 4% during the year, with a strong recovery in 2010/11 and sales growth reaching 10 per cent.

For further information on Property Watch Report please visit City of Melbourne’s website: www.melbourne.vic.gov.au/info.cfm?top=91&pg=2561