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October 21, 2025 13 mins

Melbourne's spring property market is heating up, with first-home buyers returning thanks to federal incentives slashing deposits to 5%.

 

While inner-suburb houses stay out of reach for many, apartments are gaining traction as an accessible entry point – but only if you focus on the right ones for long-term growth.

 

In this week's episode, Jarrod explains why notional land value – your proportional share of the site's underlying land – separates thriving apartments from stagnant ones, drawing from Wakelin's buyer advisory experience.

 

As development intensifies and supply tightens, understanding this unlocks apartments that capital growth:

  • The power of notional land in driving appreciation, versus the pitfalls of high-rises with diluted shares
  • Step-by-step guide to calculating your land entitlement and its proportion of the purchase price
  • Top apartment types: Boutique older blocks like Art Deco and 1950s-70s builds on under-capitalised sites
  • Melbourne's value hotspots in eastern and south-eastern suburbs like Boroondara and Stonnington
  • Developer trends targeting these blocks for redevelopment, and hurdles like owner consensus
  • A case study of four apartments sold as a site for 125% uplift, from $1M units to $9M total

We enjoy providing you with free insights into the Melbourne property market and property investment more broadly. Thank you for listening. 

If you like what you hear, subscribe, like, rate or follow us and tell your friends and family.

Investing in property makes sense.  Investing in the right property takes knowledge.

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Transcript

Episode Transcript

Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:02):
Investing in property makes sense.
Investing in the right property takes knowledge.
Welcome to the Rewarding Property Decisions podcast.
I'm Jared McCabe, director of Wakeland Property Advisory.
Join me for expert insights intothe fundamentals, trends and
opportunities to help you createlong term wealth through smart
property decisions. Hi everyone and welcome to

(00:22):
episode 109 of the Rewarding Property Decisions podcast.
Well, there's been quite a bit of activity of light through
this spring market so far. Within the first home buyer
market, we're seeing a lot of activity predominantly off the
back of the the federal government's incentive around
deposits and and only requiring a 5% deposit with them

(00:45):
supporting going as guarantor basically to to prevent lenders
mortgage insurance. So it's meaning that first time
buyers don't need to have at least 10 if not 20% to get into
the market, which is certainly encouraging a lot more activity
and encouraging buyers who perhaps wouldn't have had the
capacity to get in otherwise to come into the market.
So it's most notable at the moment within the sub $1,000,000

(01:07):
bracket, we're seeing a lot of activity in that space.
And so if you're looking to buy property in that, that sub
$1,000,000 market in the inner even middle ring suburbs, it's
very difficult to get a house atthat price point.
You've probably got to go a lot further out.
So for those that are looking toperhaps maintain an inner city
lifestyle, they're looking at alternatives and that's sort of

(01:29):
bringing in the the apartment market now for and, and
sometimes units, but predominantly the the apartment
market. Now, for those that have
listened to podcast and and spoken or spoken with us at all
in recent times, we'll know thatthe apartment market hasn't been
overly strong for a fairly extended period of time now.
It's sort of upwards of eight to10 years.

(01:51):
And if you're looking in the established market, they've
probably at least held their value in some instance, had some
minor upgrades. But for those that are have
purchased in the off the plan orhigh rise sector, you've done
well. If they've actually held value,
a lot of them have have decreased in value over that
period of time. And a lot of that comes down to
underlying land value, which is what I wanted to discuss today,

(02:11):
that the underlying land component, people quite often
don't understand how that works.But the, the notional land
component that comes with buyingan apartment is really
important. Obviously we all understand it
when it comes to a house becauseyou can physically see it.
But when it's with an apartment,it's very, it's more of a
notional side of things. So I wanted to have a look at
why it's, it's so important and how you physically when it's not

(02:32):
physically yours, how you determine how it adds value,
where the value is, those sorts of things.
So First off, why is it isn't soimportant?
Well, land really is the, the key driver from a growth
perspective when we're talking about capital growth with
property, particularly in the inner city suburbs where it is
at such a premium, the, the landcomponents and the, the supply

(02:54):
is obviously extremely limited as well.
It's they're not making any moreof it.
It's harder to harder and harderto come by as more and more
development gets brought up out of the ground.
So obviously that shortage in supply creates excesses of
demand and that's where the, thegrowth comes from and that, and
that's what pushes up value. So that's why the land is is
such an important part of selecting the right property and

(03:18):
Even so with an apartment. So how do you calculate the land
component of an apartment or unit when physically you don't
own that? Well, it's not a difficult
process, but it takes a few steps and you've probably got to
go a little bit further than what you otherwise would.
First off, determine the total site area of the of the
development that you're looking at.
And then you need to determine what that total site is worth to

(03:40):
get your idea. Now, it's not as simple with
with apartments as just dividingby the number of apartments in
the block. You need to look at the unit
entitlement which will be on theplan of subdivision because in
some developments, particularly some of the larger ones and
there'll be, there'll be one andtwo-bedroom apartments or some
of them will just be larger. And so they'll have different
unit entitlements to the development.
So you need to determine basically what your percentage

(04:03):
of ownership is within that. And that's what the unit
entitlement will tell you. It's not a percentage.
It might be there might be 240 unit entitlements and you might
own 60 units within that 240. So you've got a quarter, but
there's other ways. There's there might be others
where it's there's 240, you onlyown 20.
So understand what your unit entitlement is and what the
percentage is. And then obviously just apply

(04:24):
that to the total value, which will give you your land
component. And then you can look at it in
comparison to or what percentageit makes up of the total value
of your property. Pretty straightforward.
But you just, it's a couple of steps there and it gives you an
understanding and then you can start to look at, well, how much
of the overall purchase price ismade-up of notional land value.

(04:45):
So what type of apartments typically provide the greatest
land component? Well, it's not the high rise
sector. Typically when what you'll find
in that you'll be you'll be doing very well in a high rise
apartment. If you're over 10% in terms of
your land component, most instances it'll be sub that,
which obviously means if you've got that smaller amount of land
value, it's going to make it tough to get some some

(05:06):
reasonable growth, particularly with the the number of
apartments within that space that are available or still to
be constructed at the moment. So typically the oldest style
boutique blocks are where we want to focus in this space and
what we where you'll get the thegreatest land component and it's
usually the sites that are considered to be under
capitalized where you'll get thegreatest level of growth going

(05:28):
forward. And an Art Deco apartment is a
really good example of that because they were very much
undercapitalized. They were the first of their
type to start in Australia to start building that multi Storey
dwelling. So that that having that meant
that there wasn't in, in comparison today's standards

(05:49):
that there was a few number of apartments on what we would
consider to be a relatively large parcel of land.
And as a result, they're now considered to be
undercapitalized. It's not just Art Deco.
The, the Fifties, 60s and 70s era apartments are still very
much considered to be minimalistic in terms of
utilizing the full site. Even when they are in some nice
residential suburban streets. They feel the, the feeling is

(06:12):
that there can be better qualityand, and more usage taken up of
those sites with the way we can construct properties and things
these days. So those older style buildings
usually are a bit undercapitalized and sites,
sorry. And that that's where you've got
the opportunity to, to get some good growth.
So where are these sites typically located?

(06:34):
Well, they're, they're very muchthe, the boutique type
developments within the blue chip suburbs of Melbourne.
And they've generally been in areas where the land or the, the
demand to be in those areas has been strong for an extended
period of time. It's not something that's just
changed overnight. And we've just all of a sudden
seen that this is a popular areain most instances.
They've probably been well regarded and sought after

(06:56):
location since Melbourne was established.
So good examples of this are thethe eastern and southeast
eastern suburbs. So Burendar is stunning to those
sorts of locations. They've been long regarded as
high, high value and high demandtype locations.
And as a result, over over history, there's been a need and
a want for there to be more affordable accommodation.

(07:18):
So at different stages of Melbourne's history, there's
been apartments constructed to create that, that more
affordable accommodation. And as a result those those
sites because as we said before have been undercapitalized in
terms of how they've been built on in comparison to today's
standards means that there's opportunities there.
And the the the land component now for those as compared to the

(07:41):
high rise developments is much stronger.
So when will we get to a point where land actually starts to
exceed the overall value of these properties?
Well, we're starting to see it already.
The continued increase of underlying land value and the,
and the obviously finite resource or asset that it is,

(08:01):
has meant that the, the premiumsthat developers and builders are
now prepared to pay for these sites continues to grow because
they're not able to secure them by just purchasing a house,
because it's harder and harder to do that.
So they're looking at alternatives and the
alternatives are to go and approach a development and see
if they can they can secure it that way.

(08:22):
So we've been discussing this asa business for since Richard
started Wakeland Property Advisory in 1995.
And it's the interesting thing that is, is that over the last
five to 10 years the the talk around it and what we expected
to happen is now started to cometo fruition.
And it's it's been in the bluestof blue chip locations as you

(08:42):
would expect to start with as where the developers have
started to look because land is so expensive there and and then
the end development will realizesome higher prices.
So it's justified in those locations.
And so where it's really occurred to start with has been
around the Toorak, Hawthorne, S Yarra, East Melbourne, those
types of locations where that's where land is at a premium and

(09:06):
that's where these older style apartments can be demolished if
they're in the right locations and then new developments can be
constructed. But the interesting thing in
more recent times, probably the last probably three to five
years, is that it's starting to branch out a little bit further.
So these are still locations that are highly regarded and
highly sought after, but they'reprobably not quite at the same
level as the Tooraks and Hawthorns.

(09:27):
So areas like East Hawthorne, Prahran, which is still well
regarded, but they're now starting to, the developers are
starting to spill into those locations to look to
alternatives. And that will continue to to
occur across Melbourne. It'll, it might take longer in
certain areas, but it will certainly continue to, to spread
that way. And that's, that's the

(09:48):
expectation that we would have. Now.
There are obviously restrictionsand things that developers are
wary of. So that is something to be
mindful of if you're looking to go down this path from an
apartment purchasing perspective.
So the larger the development, obviously the harder.
So if you're in a larger multi unit development, you've got to
get everyone on site. So if there's, it's a lot harder
to get 12/16/20 people to agree to, to do one thing as opposed

(10:12):
to getting four people to do it.So it's if that's the the
target, then being in the right location, but in the smaller
blocks it's more likely to happen sooner than it is in the
larger. And then also planning controls
are a big thing too, particularly when we talk about
say Art Deco apartments because there are heritage protections
over a lot of them. So if there is likely to be

(10:34):
heritage or planning protectionsthat might prevent developers
having a certain form of interest or even things like
large trees on the site because it might make it harder to to be
to get permission to remove those and that might prevent
what they would like to construct.
So these are the sorts of thingsthat can come into play around
this development side of things.But it's definitely something to
keep an eye on and it's particularly if you are entering

(10:55):
that market, there's opportunities there and it's
only going to continue to grow over the coming years.
I've got plenty of case studies in this scenario, but I've got
one in particular that I'll, I'll discuss with you today.
It's a very, it's probably the extreme example of what, what,
what I've discussed today, but it certainly gives you a really
good understanding as to how this can play out.

(11:16):
We had a, a client or a couple of clients that we purchased in
a block of four apartments over the years.
And there was another person that owned the other two.
So there was 3 owners for four apartments within this complex
in Melbourne's eastern suburbs and it was in a very, very well
regarded St. in Hawthorne. And this property was extremely

(11:38):
undercapitalized in terms of itssite.
So 4 apartments on a side of in excess of 1000 square meters, so
well undercapitalized in a very high land value location.
But they came to us with the understanding and all three
parties were very keen to proceed and progress with this
that they would like to sell thethe development as a whole.
Individually the apartments wereprobably worth around $1,000,000

(12:00):
each. They were in fairly basic
condition. The site had been maintained but
was not overly attractive in terms of individual apartment
ownership. So around $1,000,000 per
apartment. We felt that if we took it to
market with a bit of a tidy up around the site that we would be
able to pitch it in the $7,000,000 range.
So it's significant increase in terms of individual value of

(12:23):
each apartment, which we did, took it to the market, it went
really well, had lots of interest.
I think there was 3 or 4 bidderson the day of the auction and it
ended up selling for an excess of $9 million.
So there, that was sort of two and a quarter in excess of two
and a quarter mil per apartment.So significantly more than what
they would have achieved on their own.

(12:44):
And as I said, it is an extreme example because it was
significantly undercapitalized, but it, it paints the picture
of, of what's happening and how this can continue to occur in in
coming years. So that's about it.
It's really important to focus on on that LAN component.
Get as much of it as you possibly can.
But thanks for joining me for episode one O 9 of the rewarding
property Decisions podcast. As always, please subscribe to

(13:07):
the YouTube channel, the podcastchannels, and feel free to share
the podcast far and wide with friends, family, and any other
interested parties in property. Otherwise, if you'd like further
information, please visit the website wa-com.com dot AU.
Otherwise, we wish you all the best with your.
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