Amid talk of an apartment oversupply in Melbourne’s inner suburbs, you may wonder whether buying into the market is crazy. But what you may not know is that much of what you’ve heard focuses solely on the short term outlook. As we look beyond the immediate future, there are a number of factors telling us that purchasing a Melbourne apartment is an option worth considering.

Factor #1: Population growth 

The first thing to look at when assessing our property market is population growth. Victoria is the fastest growing state in the nation in terms of population and according to State Government’s most recent forecasts, the population boom is only just getting started. Victoria's population is due to almost double between now and 2051, with Melbourne’s inner and middle suburbs expected to grow by almost 1 million in that time. To put those figures into context, that means Melbourne will experience approximately the same volume of growth that occurred over the last 85 years, in the next 35. We have an increasing number of people to accommodate over the next 30-40 years at least, and that’s where Melbourne’s apartment market will come to fruition.

Factor #2: Housing affordability 

We must not ignore the role apartments play in the housing affordability equation. The reality is that a decreasing number of Victorians can afford to buy or live in a house, and we need to give them other options. Melbourne needs a diverse range of housing for young people, low to middle income earners, pensioners and everyone in between – that way people across all walks of life get a choice on where they live.   As the price of houses continues to skyrocket, contemporary apartments will become a more realistic form of housing for a broadening range of people, especially for those who want to live inner city rather than being pushed 20km out of the CBD.

Factor #3: Weakening supply  

Melbourne saw relatively high levels of apartment supply in 2015 and 2016, which is what fuelled the oversupply claims. But according to research presented by Charter Keck Cramer at UDIA’s last breakfast event on the Melbourne apartment market, we’re now seeing a significant decline in the number of new apartments coming to market, and that really challenges the perception of an oversupply. In fact, if we look at population projections and the rate at which new apartments are coming to market right now, it’s more likely Melbourne will experience an undersupply of apartments in the medium to long term. 

All factors considered, buying an inner city apartment in Melbourne is not a crazy idea. The trick is to think of it as a long-term investment rather than a way to make a quick profit. 

Read more about the Melbourne apartment market:

Old apartments more valuable than new, says Secret Agent

Melbourne apartments not up to new standards

The best and worst suburbs to buy off the plan