Concern over rising foreign investment
International developers, which have been staging a major push into the local market since the GFC, will double their market share of projects by 2014-15 after more than doubling it in the past two years, analysts Charter Keck Cramer say.
It's expected to be the peak of a "structural shift" that began in 2008, when foreign private, listed and government-backed entities were historically responsible for building just 10 per cent of residential stock in the CBD, Southbank, Docklands and St Kilda Road precincts.
"It represents an 'internationalisation' of Melbourne's apartment market, and there are all sorts of ramifications for the type of stock that is being built, who buys the apartments, and what it means for the liveability of the city," said CKC director Robert Papaleo.
Offshore developers have been attracted by Australia's robust economic performance, comparative affordability of development sites, and the country's status as a safe place for foreign investment.
The influx of capital has pushed most local developers out of the central city market as they find themselves outbid or hamstrung by tighter funding restrictions that have been in place since the GFC.
Hamton joint managing director Paul Hameister said many offshore developers were sourcing debt finance in their country of origin, which enabled them to sell up to 80 per cent of their apartment stock outside the country.
There was some concern that overseas developers were applying the development logic and "framework of their home markets" to Melbourne's CBD, which had different demand dynamics, he said.
"In Melbourne, people historically don't want to live in the city," Mr Hameister said. "It defies logic to me. That's why as a developer we are wary of the CBD."
But Mr Papaleo said the competition was now "chasing local developers down the road".
Analysts and planners are worried about the effect such a large wave of residential development will have on Melbourne's property market and the inner city's liveability.
"We also need to think about what is the purpose of the stock being built: is it to house our growing domestic population or is it a financial product that's being built to satisfy the needs of offshore investors? That's a pretty big question," Mr Papaleo said.
Pace Development Group founder Shane Wilkinson estimates about 50 per cent of Melbourne's apartments are being sold offshore.
"At some point in time that investor product we've all been selling for so long, is going to come to an end. It's going to turn back to more owner-occupier stock," he said.
That could have a dramatic effect on demand, he said.
Frequently Asked Questions about this Article…
Foreign investment in Melbourne's apartment market is rising due to Australia's robust economic performance, the comparative affordability of development sites, and the country's reputation as a safe place for foreign investment.
Foreign investment in Melbourne's apartment market is rising due to Australia's robust economic performance, the comparative affordability of development sites, and the country's reputation as a safe place for foreign investment.
By the end of the next financial year, offshore developers are expected to be responsible for building half of all apartment projects in Melbourne's central city area.
By the end of the next financial year, offshore developers are expected to be building half of all apartment projects in Melbourne's central city area.
The influx of foreign capital has pushed many local developers out of the central city market as they find themselves outbid or constrained by tighter funding restrictions.
The influx of foreign capital has pushed many local developers out of the central city market as they find themselves outbid or restricted by tighter funding conditions.
Analysts are concerned about the impact of large-scale residential development on Melbourne's property market and the inner city's liveability, questioning whether the new stock is meant for the domestic population or as a financial product for offshore investors.
Analysts are concerned about the impact of large-scale residential development on Melbourne's property market and the inner city's liveability, questioning whether the new stock is meant for the domestic population or as a financial product for offshore investors.
Many offshore developers are sourcing debt finance in their country of origin, which allows them to sell a significant portion of their apartment stock outside Australia.
Many offshore developers are sourcing debt finance from their home countries, which allows them to sell a significant portion of their apartment stock outside Australia.
The 'internationalisation' of Melbourne's apartment market refers to the increasing involvement of international developers, which affects the type of stock being built, the buyers of these apartments, and the overall liveability of the city.
The 'internationalisation' of Melbourne's apartment market refers to the increasing involvement of international developers, which affects the type of stock being built, the buyers of these apartments, and the overall liveability of the city.
Local developers anticipate a shift from investor-focused products to more owner-occupier stock, which could significantly affect demand in the future.
Local developers anticipate a shift from investor-focused products to more owner-occupier stock, which could significantly affect demand in the future.
It is estimated that about 50% of Melbourne's apartments are being sold to offshore buyers.
It is estimated that about 50% of Melbourne's apartments are being sold to offshore buyers.
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