Melbourne’s Housing Prices Defy National Trends
Melbourne’s housing prices have bucked the national trend, with the city’s median dwelling price standing at approximately $776,000 amidst a backdrop of reduced competition and oversupply, particularly when compared to the national market trends.
Despite being the sixth most expensive capital in Australia, demand driven by first-home buyers and owner-occupiers is driving the market. According to current trends, a modest 9% growth in investor lending in Victoria is also affecting prices, which may continue to stabilize in the coming year.
As market dynamics continue to shift, understanding the intricacies of Melbourne’s housing market is essential to uncovering the factors driving these trends.
Highlights
- Melbourne’s median dwelling price is $776,000, defying national trends amidst reduced competition.
- Oversupply results in reduced buyer competition and pressure on prices in Melbourne.
- Victoria’s modest 9% growth in investor lending compared to other states affects the housing market.
- Economic influences, such as new taxes on investment properties, impact Melbourne’s housing prices.
- Commonwealth Bank predicts a 4% price increase in Melbourne’s housing market next year despite national trends.
Current Market Analysis
In the current Melbourne housing market, a distinct trend has emerged, with the median dwelling price standing at approximately $776,000. Despite being the sixth most expensive capital, Melbourne’s housing affordability ranks only behind Hobart and Darwin. Buyer demographics play a vital role, with first-home buyers and owner-occupiers driving demand.
The rental market is also experiencing changes, with total property listings running 25% above average levels. This oversupply contributes to reduced competition among buyers, making it a more favourable market for those looking to purchase.
Supply and Demand Factors
While Melbourne’s housing market grapples with unique challenges, the supply and demand dynamics at play have greatly influenced its trajectory. A key factor is the high level of property listings, currently running 25% above average levels. This oversupply has contributed to reduced competition among buyers, easing the pressure on prices.
According to data, Victoria has completed 825,000 homes since 2010, outpacing New South Wales by over 100,000. This new supply in the market has contributed to lower home prices. Additionally, the modest 9% growth in investor lending in Victoria over the past year, compared to 30% in other states, has also impacted buyer competition. As a result, Melbourne’s housing market has been shaped by these supply and demand factors.
Economic Influences on Prices
Several economic factors have markedly contributed to the unique situation in Melbourne’s housing market. A new tax on investment properties, implemented to address the state debt projected to approach $200 billion in coming years, has greatly impacted investor behaviour. The land tax threshold has been reduced from $300,000 to $50,000, further deterring investors.
These tax implications have led to a mere 9% increase in investor lending in Victoria over the past year, compared to 30% growth in other states.
As a result, economic indicators in Victoria show discrepancies compared to other states, contributing to the complex housing market situation. These broader economic issues are vital in understanding the current state of Melbourne’s housing market.
Melbourne Submarket Trends
Melbourne’s housing market comprises various submarkets, each with distinct trends and characteristics that defy the overall market narrative. A closer examination of these submarkets reveals diverse trends within the overall market. For instance, the luxury market has experienced a decline in sales, with high-end properties lingering in the market for extended periods.
| Submarket | Median Price | Price Change |
|---|---|---|
| Inner Melbourne | $1.3M | -10% |
| Middle Melbourne | $830K | +2% |
| Outer Melbourne | $630K | +5% |
The apartment sales market has also been impacted, with about one-third of dwellings in Melbourne being apartments, skewing median prices. This trend is unique to Melbourne, with other cities like Adelaide and Perth having a notably lower proportion of apartments.
Future Price Projections
Forecasters are painting a cautiously optimistic picture for Melbourne’s housing market, with the Commonwealth Bank predicting a 4% increase in prices next year, driven primarily by interest rate relief. This projection suggests that the market may be stabilizing after a period of decline
The expected price growth is attributed to the historical correlation between interest rates and property prices, which indicates that as interest rates decrease, property prices tend to increase.
This trend, combined with Melbourne’s market resilience, may lead to price stabilization in the coming year. While recovery is expected to be slower compared to other capitals, Melbourne’s affordability is likely to remain relatively intact due to supply challenges in other cities.
