Melbourne: three-bedroom units a surprise winner in building crisis

4804/63 La Trobe St, Melbourne, has a three-bedroom floorplan that could make it hot property in the CBD.

Melbourne’s family-sized apartment market has turned into a surprise winner of Australia’s home building crisis as the city starts to follow a trend started decades ago in Sydney.

Real Estate Institute of Victoria data has revealed three-bedroom unit prices have surged more than $155,000 (14.1 per cent) in the CBD in the past year.

The uptick has been so massive that the three-bedroom unit’s $1.255m median price tag would cover a pair of the city’s $565,000 two-bedroom apartments — which haven’t gained value in the same timeline.

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It comes as developers are now prioritising the more expensive build type after years of passing them over in favour of cheaper one- and two-bedroom offerings, as larger sky homes help apartment complexes to stack up financially amid heightened building costs.

Real Estate Institute of Victoria acting chief executive Jacob Caine said with three-bedroom houses anywhere near Melbourne’s CBD now at a “very significant price point”, typically far in excess of the wider city’s median house price, affordability was a major factor in the rise.

Another was that three-bedroom apartments historically had typically been built to higher standards than those in more affordable price brackets, making them more appealing as well.

“And the societal attitude towards families living in apartments are starting to shift,” Mr Caine said.

1802/18 Waterview Walk, Docklands, has a three-bedroom floorplan and a $1.08m-$1.15m price tag.

Similar trends to the suburb of Melbourne are emerging in Docklands, where three-bedroom apartments are now up $35,000 (3 per cent) from a year ago at $1.185m — despite one and two-bedroom homes in the area both losing value.

Prices are also way up for three-bedders in Box Hill, rising close to $50,000 (5.7 per cent) to $883,000 in the past year — while more modest homes in the area have flatlined or dropped in value.

Mr Caine added that building costs were now so high the numbers simply didn’t stack up to build more affordable options.

“The ones that are making money are generally larger and more expensive,” Mr Caine said.

“And with a higher square metre rate, they are now being built.”

Marshall White project management director Leonard Teplin said most new apartments being sold today were going to well-funded buyers scaling down from a larger property in the suburbs.

The Malvern Gardens development at 1287-1295 High St, Malvern, has sold out — with the vast majority of homes in the complex featuring a three-bedroom floorplan.

Mr Teplin said most wanted a floorplan big enough for a three-bedroom layout with a study, though it might be converted to a smaller number of bedrooms with bigger entertainment spaces available.

Prices for such homes in Melbourne’s leafy east now regularly start at about $2m, with larger ones selling for north of $5m.

“And, depending on the price point, it can be anywhere from a 100sq m home to a 350sq m one,” Mr Teplin said.

“Twenty years ago it was an investment, Now it’s a home.”

He said the market had been shifting in favour of bigger, more luxurious apartments since 2021.

“It’s all come down to building costs, they have to be bigger and they have to sell for a bigger price,” Mr Teplin said.

“You just can’t build them for less than $700,000 with the land and the build and all the taxes.”

While most are selling top downsizers today, the homes are building a future of family-friendly sky homes.

In recent months the Malvern Gardens and Central Park Residences complexes, in which 95 per cent of all apartments were three-bedroom offerings, both sold out before construction was completed.

Mr Teplin said more garage space, customised joinery in entry areas, extended ceiling heights up to 3m tall and increased storage space are also among the features helping larger apartments to appeal to families as well as downsizers.

“And the uplift has been quite phenomenal for those people who did buy over the last couple of years,” he said.

“It might be 20 or 30 per cent in some cases. Where a larger apartment might have been $13,000-$15,000 a square metre pre-pandemic, now it’s over $20,000.”

Charter Keck Cramer national executive director of research Richard Temlett said Melbourne was beginning to follow the lead set by Sydney decades ago, with families here increasingly likely to pursue larger apartments — especially in good school zones from Fitzroy to the city’s inner eastern suburbs.

“And so there’s a supply shortage of three-bedroom apartments, as it’s not just downsizers that want them — there’s also families,” Mr Temlett said.

The three-bedroom apartment at 4804/63 La Trobe St, Melbourne, is listed for sale with a $1.85m-$1.9m asking price.

Another three-bedroom sky home at 3401/545 Station St, Box Hill, is for sale at $1.3m-$1.4m.

At the time of the last Census, three-bedroom apartments made up just 9 per cent of Melbourne’s 204,442 unit total — the lowest level nationwide.

“But developers have now realised that the ones and twos are not making any money, even though they are in demand,” Mr Temlett said.

Ruuhm Group development firm boss George Bakrnchev has registered the trademark for “housepartments” and is building boutique unit complexes to a set of minimum standards — including a baseline 135sq m size requirement for three-bedroom apartments.

In Sandringham’s Symphony 3 complex at 25 Sims St the smallest apartments measure from 236-298sq m in size, while the penthouse is 305sq m.

“They don’t want to move from the area they are in, and they don’t want to compromise on the home,” Mr Bakrnchev said.

3/25 Sims St, Sandringham, has a three-bedroom floorplan beneath a top floor home that has sold to a downsizing family expecting visits from their adult daughter from time to time.

The semi-penthouse residence is currently for sale with a $2.395m-$2.595m.

The penthouse buyer was a family whose adult daughter returns home from time to time, and they wanted the extra space to provide that flexibility — even though they have downsized from a larger house nearby.

He’s now expecting to sell out the complex before the end of the year.

“Every year that we wait, the pressure to provide that sort of home will be higher, because the demand will be there,” Mr Bakrnchev said.

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