As featured in Green Street News
18 March 2025
Consultants Charter Keck Cramer are forecasting a recovery in the apartment development market on the back of tailwinds such as strong population growth and lower entry prices
A recovery in Melbourne’s “collapsed” apartment market is less than 12 months away, consultancy and valuation firm Charter Keck Cramer predicts.
Tailwinds including strong population growth, relative affordability, attractive livability and lower interest rates will help stimulate demand and construction activity,
“The apartment market will start to accelerate from next year,” CKC national executive director of research Richard Temlett said at an industry briefing in Melbourne on Monday after the firm released its latest State of the Market report.
“We’re seeing positive interstate migration back into Melbourne and attractive pricing,” Temlett said.
“People are saying ‘look how affordable Melbourne is. It’s a larger city [than Brisbane, where apartments are more expensive] and has better-paying jobs.”
Temlett said recovery greenshoots have emerged in 2025 after the apartment market collapsed last year due to a dramatic increase in building costs.
“2024 was the worst year for development in Melbourne for 20 years,” he said.
Build-to-sell projects were very difficult to get away, Temlettt said. Only developers with premium stock priced 30% above the market were able to sell sufficient apartments off-the-plan to proceed to construction.
CKC’s latest report shows only 4,800 apartments were completed in Melbourne last year, a drop of 36% from 2023, and less than half of the more than 10,000 apartments completed in Sydney.
Looking ahead, Melbourne has only 6,320 apartments under construction, compared with 21,550 in Sydney.
‘Upside is coming’
The situation in Melbourne was “pretty confronting, but an upside is coming”, Temlett said.
A series of interest rate cuts are expected to stimulate the Melbourne market and other capital city apartment markets.
But Melbourne’s unique fundamentals also are likely to support fresh investment.
These include population growth: Melbourne is projected to remain the fastest-growing capital city with more than 100,000 people coming each year between now and 2029.
Another positive factor is the city’s livability – Melbourne ranks as the fourth most livable city in the world, ahead of Sydney, according to the Economist Intelligence Unit, and ranks high on safety, education and wealth.
A key factor that is expected to drive the recovery is Melbourne’s relative affordability. Median apartment prices have dropped below those in Brisbane, a city with a smaller population, fewer jobs and infrastructure. They also are significantly lower than Sydney apartment prices.
“Melbourne’s housing market is significantly undervalued,” Temlett said. “It’s gone from second to sixth, and there is strong logic that it will recalibrate back to number two. The stats show there is strong evidence it is undervalued.”
Lastly, Temlett pointed to the relative lack of penetration of apartments in Melbourne. They make up less than 8% of total dwelling stock compared to Sydney, where apartments make up 20% of the market.
Temlett predicted apartments would make up a fifth of all dwellings in Melbourne by 2050.
“There is lot of bashing of Melbourne, but lot of positive stuff too,” Temlett said. “Overseas buyers’ view on Melbourne is very different. There is a lot more positive sentiment out there. These buyers see the long-term fundamentals.”
