New property sales declined for the second month in a row in May, according to the Housing Industry Association, but new apartment sales bucked the trend, recording a bounce of 4.9% and trending higher.

Total new home sales declined 4.4% in May, following a 4.7% fall in April 2016. The sale of detached houses fell by 6.7% for the month.

David Allt-Graham, Managing Director of Residential for Melbourne Docklands developer MAB, says Australians have become accustomed to the idea of apartment living.

“MAB’s experience working in NewQuay for the past decade-and-a-half has seen a shift in Australian living habits, specifically the shift to apartment living from suburban houses and the maturing of Melbourne into a cosmopolitan and globalised city.”

Allt-Graham said improved apartment design is also contributing to stronger sales.

“Well-designed apartments in a connected, amenity rich, inner-city location will have an enduring and growing appeal. We’re starting to see more options that meet the needs of different buyers. For instance, there’re now apartment options in the luxury end of town as well as the first-home-buyer market. There are also spacious one-bedroom options for young professionals who work at home, in addition to three-bedroom apartments equipped with inclusive amenities catering to families, like gardens and libraries,” he said.

Allt-Graham said sales to foreign buyers have remained firm, despite the uncertainty and difficulties created by new taxes and tighter bank lending.

“MAB hasn’t seen a major impact to date, however these persistent changes and uncertainty must be avoided,” he said.

“Clearly when buyers are considering a long term investment, it is extremely unsettling when the rules keep changing, especially around funding and tax.”

The appeal to foreign buyers of good-quality Australian property has not diminished, said Allt-Graham, but should not be taken for granted.

“Most of our foreign buyers are owner-occupiers who are looking to purchase in Australia to live here permanently. Some of the benefits of moving to Australia – namely political stability, clean air and green spaces, lifestyle changes, world class education and quality entertainment precincts – will likely outweigh the additional taxation, but the current strength of foreign investment should never be taken for granted,” he said.

Allt-Graham said fears of oversupply in the Docklands rental market have been overstated.

“We are seeing low vacancy rates in the Docklands rental market, so rental demand is keeping up with supply. We continue to see strong demand from apartment buyers at NewQuay, as evidenced by sales of MAB’s luxury apartment development Banksia, which is almost sold out.

"Large, high-quality and distinctive apartments will continue to be met with enthusiasm among Victorian buyers, particularly as our population continues to grow and migration to Australia continues,” he said.

Low interest rates and demand for good-quality apartments are likely to support sales for the remainder of the year, says Allt-Graham.

“In NewQuay and the wider Docklands area MAB expects new home sales to remain steady, fuelled by record low interest rates and a demand to live on the footstep of Melbourne CBD,” said Allt-Graham.

“Despite the uncertainty with the federal election taking place next week and negative gearing changes and the capital gains tax on the table, we remain committed to delivering well designed, well located and amenity-rich developments to maintain the strong sales we are seeing into the second half of the year.”

See also:

New home sales take a dip

Construction and renovations propel economy

New home sales have peaked

Housing affordability improving, says HIA