Affordability fuels surging demand in Victoria
After seeing values drop during the past 12 months, investors in Melbourne now have a good reason to smile: property prices are on their way up again.
According to Residex, median house price in Melbourne climbed by almost 3% to $492,500 over the June quarter. Only Darwin performed better at 5.25% growth in the same period.
Units in Melbourne also staged as strong showing over the year with median price jumping by 7.07% to $387,000. Over the three months ending June, prices rose by 4.46%
PRDnationwide research analyst Aaron Maskrey says Melbourne is perceived to be currently going through the bottom end of the market, and is set to climb its way into recovery, thanks to its affordability when compared to both Brisbane and Sydney.
"Similar to other states, dwelling finance for owner occupiers is trending upwards within Victoria, with the number of finance commitments bouncing back during 2009. Vacancy rates around Melbourne are still relatively tight resulting in a competitive rental market and rising rental rates. . These are all positive signs for the property market," he says.
It is not just Victorians who are trying to get into the Melbourne property market. Investors from other states have taken advantage of lower prices in the capital. This has allowed Melbourne to rebound from the price lows late last year.
BIS Shrapnel analyst Angie Zigomanis says that the recession has shifted the focus of investors away from the inner and middle suburbs to some of Melbourne's outer regions. "Through the last couple of years before the market took a quick sharp downturn last year, it was the inner to middle suburbs of Melbourne that were doing well, the outer suburbs were pretty flat," he says. "Part of the reason for that was that we were going through economic boom and people were getting a lot of additional income above their salaries in terms of bonuses and incentives and so forth."
That "extra cream income" is not there anymore, Zigomanis says, putting the brakes on the top end of the market. However, record low interest rates have made the bottom end of the market more affordable to salaried workers who are finding bargains in some of the outer suburbs where price growth has been a lot stronger in the past few months.
"The western suburbs in Melbourne are quite close to the city compared to Sydney's western suburbs and you can still get a house and land package for mid to high $200,000s as an entry level price," Zigomanis says. "It's something that the average salary earner can still afford and is still accessible to them. The area also doesn't have some of congestion issues that Sydney has as well so people can be more willing to live in some of those areas."
Melbourne's continued ascent to the summit of the population rankings means that property prices in the outer suburbs are likely to outperform their inner city peers. This provides a great opportunity for investors to get onboard and take advantage of what are increasingly looking like bargain properties.
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