Supply and demand issues continue to push prices up in central Melbourne. While the Residex figures suggest a solid, yet uneventful 12 months for Melbourne, Herron Todd White think an affordability crisis may be just around the corner.
“From the start of 2007 we have witnessed the rapid rise in market values for inner Melbourne properties,” cites the valuer’s report for October. “Median prices of housing within this segment have jumped significantly within the previous 12 months, creating enormous pressure on housing affordability. Demand and supply are always at the core.”
With buyers competing for prime properties, prices are rising, and many owner occupiers and first time buyers are being pushed further from Melbourne’s central suburbs. In addition to this, rental vacancies for inner Melbourne are at a 25-year low of 1.8%.
“The limited supply and strong demand are pushing rents up,” says their report. “The impact is similar to that of the ripple effect for purchasers, as renters are pushed further out from the inner city.”
A move from the traditional forms of housing into low density, high maintenance apartment living also marks a new trend, according to the report: “We have seen significant upward market movement in apartments, as younger owner occupiers seek to secure an inner city lifestyle. Put investors into the mix, lured on strengthening yields (up to 7% in the Melbourne CBD, generally 5% through inner city), record vacancies and strong capital growth, and conditions are ripe for an affordability crisis.”
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