Tim Gurner believes Melbourne has under-supply of apartments in the inner city – not an over-supply as is widely believed.
The BRW Rich Lister developer said he witnessed, first-hand, the level of tenant demand, after tipping 150 rental apartments on to the market at his Ikebana development in West Melbourne this month.
Within 10 days of advertising the apartments online, there had been 55,000 views and 1500 enquiries.
"Most importantly, we opened two apartments on Saturday and Sunday [last weekend] for the first time and had more than [prospective] 450 tenants come through. We were absolutely run off our feet as we expected only 20 or 30," said Mr Gurner.
With over 200 applications submitted for only 150 apartments, Mr Gurner said he expected to lease them all ahead of settlement later this month.
"The weekend's response is like nothing I have ever seen before in my 15 years in the industry – we could have leased the project 10 times over, it is absolutely astounding."
The Reserve Bank, the major banks and analysts have all voiced their concerns about an oversupply of apartments on the East Coast, particularly in Brisbane and Melbourne with Morgan Stanley warning of a 100,000 national surplus by 2018.
While this may be the case in the CBD and Docklands' high-rise towers with hundreds of identical apartments and a reputation for being noisy "party pads", Mr Gurner says this is not true in the better quality developments in the nearby suburbs.
"I have been saying for the last 12-18 months that I believe there is an under-supply of apartments in the inner city in contradiction to all media reports.
"To date I have only been able to prove that with our sales evidence, however now we have real evidence at completion that there is also a huge demand from tenants," he said.
Vacancy figures compiled by the Real Estate Institute of Victoria support the view that demand for apartments is stronger in the fringe CBD locations than the city centre itself.
Over November, the REIV recorded the vacancy rate across the CBD, Southbank, St Kilda and Docklands at 3.3 per cent compared with 2.5 per cent for suburbs within four kilometres of the city and 2.1 per cent for those up to 10 kilometres out.
Melbourne leasing agent Georgie Sinclair, from Dingle Partners, said new apartments in the inner suburbs tended to perform better as rental properties than those in the high-rise towers.
Ms Sinclair said many investors were putting CBD apartments back into the rental pool as their "default position" because they could not sell them, meaning greater choice for renters.
"In the huge developments, investors are struggling to get what they want in terms of rent. They are told they can [get] $650 a week for a two-bedroom unit, but are struggling to get $550," she said.
Also a factor is the quality of apartments in the city compared to those in the inner suburbs, she said.
"High-rise apartments tend to have pretty simple stock fit-outs whereas in the inner suburbs, there is some styling and often better quality finishes," she said.
Ikebana, on Dudley Street, about 100 metres from the Melbourne CBD, features 241 apartments. Apartment rentals start from $260 per week for a studio up to $470 per week for a two-bedroom unit.
"The type of tenants we are witnessing is in line with our original demographic research, which suggested the area would be mostly in demand by doctors and nurses servicing the local hospitals, local workers feeding into the Docklands employment precinct, and parents securing an apartment for their children to live in while at university," Mr Gurner said.
