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We are pleased to provide you with our weekly development sector update – ‘The Development Digest’. This update will cover:
Melbourne Residential Market Dynamics Q2 2025
Domain June 2025 Apartment Market Update
Headlines of the week
Current & Forthcoming Opportunities
Melbourne Residential Market Dynamics Q2 2025
JLL has recently released a Q2 Melbourne Apartment Market snapshot. According to the research piece, the Melbourne apartment market is experiencing historically low supply levels combined with stagnant prices and continued rental growth. Despite flat capital values, transaction volumes are increasing, driven by first-home buyers responding to interest rate cuts and investors attracted by rental growth prospects.
Key Takeaways:
Melbourne apartment completions in 2025 are projected to reach a 10-year low, with only 771 completions in Inner Melbourne year-to-date
Total 2025 completions expected to be 53% lower than 2024 and 28% below the previous low in 2022
Median apartment sale price remains stable at $610,000, with minimal negative growth (-0.2% YoY)
Apartment rents continue to grow at 3.0% year-on-year despite slowing momentum
Melbourne has the highest vacancy rate among Australian capital cities at 1.7%
Construction cost pressures and reduced realisation rates are delaying project commencements
Sales volumes have increased year-on-year and exceed pre-COVID levels
The cash rate cut in Q2 2025 is improving first-home buyer confidence and market entry
Supply constraints may persist until 2030 unless approved projects are accelerated
Build-to-rent projects could be prioritised to address rental market demand
Domain June 2025 – Rental Report
The Domain Rental Report for June 2025 reveals a cooling rental market across Australia's major cities following years of strong growth. While median rents in most capitals have reached record highs, quarterly and annual growth rates are notably slowing compared to the peaks of 2022-2023, signaling a potential easing of pressure on tenants as vacancy rates begin to inch upward from extremely tight levels.
Key Takeaways:
Sydney house rents reached a record $650/week, but quarterly growth slowed to just 0.8%, the weakest June quarter in four years, with annual growth dropping to 2.4%.
Melbourne rents remained unchanged at $550/week for a fourth straight quarter, the longest period of stability since 2011-12, with annual growth stalling at 0%.
Brisbane house rents increased by 1.9% to $620/week, marking the fastest quarterly growth among capitals, though still only one-fifth of March's increase.
Perth recorded the strongest unit rent growth among capitals at 5.5% for the quarter, reaching $290/week and annual growth of 12.9%.
Unit rents are outperforming house rents across multiple markets, narrowing the price gap between property types to record lows in some cities.
Vacancy rates are showing early signs of easing but remain below balanced market levels in most capitals, indicating continued tight rental supply.
Canberra has established itself as the second most expensive city for house rentals ($600/week), behind only Sydney.
Hobart experienced renewed growth with unit rents jumping 6.3% to a record $400/week, pushing annual growth to 11.1%.
The national rental market appears to be transitioning from the extreme pressures of 2022-23 toward more moderate growth in the second half of 2025.
Headlines of the week
The Australian Financial Review – Cbus Property set to build $400m Melbourne residential development
Cbus Property acquired a one-hectare site along Melbourne's Yarra River for more than $50 million to build a $400 million residential development.
The project will include 187 homes across two 10- and 12-storey towers, plus townhouses fronting the river and amenities like an indoor pool and communal rooftop.
CEO Adrian Pozzo aims to create a relatively more affordable product that still maintains exceptional quality for all demographics including right-sizers.
The Australian Financial Review - $2.5b luxury apartment project planned for Sydney
Lendlease has acquired a site at 175 Liverpool Street in Sydney overlooking Hyde Park for a $2.5 billion luxury apartment development.
The project will include 300 units in two towers, with a design that permits views through to the city's Anzac Memorial shrine.
The development, expected to begin in FY27 and complete by 2030, adds to Lendlease's pipeline of luxury homes targeting wealthy Baby Boomers who are downsizing.
The Australian – Salter Brothers plans apartment-led transformation for Sydney’s Darling Harbour
Salter Brothers has proposed a multibillion-dollar redevelopment of Novotel and Ibis hotels in Darling Harbour to include 1000 apartments.
The proposal involves replacing the Novotel with a premium-grade hotel, refurbishing the Ibis Hotel, and seeking 99-year lease agreements with Place Management NSW.
The NSW government noted the plan could deliver public benefits including increased housing supply and boost to NSW's visitor and night-time economy.
The Urban Developer – Dandenong Quarry Rezoning Clears Way for Housing Estate
A former 9.2ha quarry in Ferntree Gully has been rezoned from Special Use Zone to Neighbourhood Residential Zone to allow for housing development.
The $50 million project will include a 138-lot subdivision with eight lots allocated for affordable housing through a community housing provider.
The quarry, which produced clay for brick manufacturing from 1955 to 2009, has been filled to a depth of 10m in preparation for development.
The Urban Developer – Leftfield Lifts Cover on 14-Storey Scheme at Camberwell
Leftfield Property has submitted a proposal for a 14-storey mixed-use tower at 691-693 Burke Road in Camberwell, requiring demolition of existing buildings.
The development would include 57 apartments (with 10% affordable housing), 313sq m of retail space, and 1924sq m of office space across three basement levels.
The site is within the Camberwell Junction Activity Centre, part of Victoria's push to increase high-density housing around Activity Centres.
The Australian Financial Review – Forget uni hovels, students want a hotel-style ice bath and sauna
Centurion Corporation is launching a luxury $132 million student accommodation development in Sydney featuring amenities like infinity pool, saunas, and ice pool.
The 732-bed EPIISOD brand in Macquarie Park aims to meet growing demand from international students (1.09 million enrolments in 2024) for hospitality-style accommodation.
Centurion plans to develop at least four more sites in Melbourne and Perth by around 2028, noting Australia's student accommodation market is less mature than the US and UK.
Mortgage Professional Australia – Construction costs edge high, posing fresh challenge for RBA
Australia's construction costs rose 0.5% in June quarter 2025, with annual growth reaching 2.9%, affecting RBA's inflation outlook and housing supply targets.
Labor shortages in construction are expected to persist until at least mid-2028, putting upward pressure on building costs and eroding builder margins.
Western Australia posted the highest quarterly increase in construction costs at 0.7%, while all states remain below the pre-pandemic decade average of 1.0%.
Current & Forthcoming Opportunities
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We hope you have enjoyed another edition of The Development Digest. Please reach out to our team if there is anything we can assist you with.
