A winter chill hits Victoria’s property market
The Melbourne market has been slowing since last winter: it seems that the big freeze is well and truly taking place at present.
The generally sluggish market, which has seen price growth slow across Australia, has combined with a long-expected period of pause in the Victorian capital to bring its bull run to a dead stop. RP Data figures indicate that values have fallen marginally over the last year, with the Melbourne median down 0.4%. Even so, that’s one of the more moderate falls in Australia – it looks like Melbourne’s prices are heading for a steady slide to a plateau rather than falling off the side of a cliff.
“Melbourne had the biggest price rises and the most activity until early last year,” says Andrew Wilson, senior economist at Australian Property Monitors. “Obviously there had to be correction, and that’s happening; however, it’s not correcting in a disorderly fashion. We’re seeing a flattening in prices at this stage, but there’s still a reasonable amount of buyer activity.”
Wilson adds that APM figures show that activity actually increased in April, although this may be down to seasonal peaks and troughs. He warns that the winter is likely to kill that activity stone dead.
That’s not to say that the Melbourne market is totally stagnant, however. Wilson suggests that while first homebuyers are thin on the ground, the middle and prestige ends of the market are still moving.
“Melbourne’s prestige market doesn’t have the same upper-end affordability barriers that Sydney’s prestige market has,” he comments. “There’s better access on a value basis for prestige property in Melbourne – a million dollars will buy a hell of a lot more in Melbourne than it will in Sydney. Therefore, there’s more stability and activity in that market.”
The director of Metropole Property Strategists’ Melbourne buying arm, Charles Marvelli, agrees that property in sought-after locations such as Bayside and the inner belt around the CBD are still on the up.
“We bought a unit back in December for $570,000; we went back to the same block in May and an identical unit in terms of floorplan was going for $605,000,” says Marvelli. “There’s evidence that prime quality areas are still holding firm. They won’t grow as strongly as in recent years, but they’re still on the increase.”
Marvelli recommends locating properties where there’s scope to add value through a cosmetic reno. Not only does this increase the property value, he says, but it also increases rents – a key factor in a market where yields are still typically under 4% (albeit rising).
Marvelli adds that the opportunities are there for the taking:
“This is my favourite type of market,” says Marvelli. “It creates opportunities. If you know what you’re doing, you can make a significant amount of money while other people are running for cover.”
Herron Todd White associate director Perron King suggests Melbourne’s inner-west is another ‘shining light’.
“The strip of suburbs from Kensington to Williamstown – Newport, Spotswood, Yarraville and Footscray - all represent good value for money and decent demand. The suburbs adjoining Footscray in particular are quite low density, and are desirable spots for 30-something professionals starting families. They’ve got good infrastructure, good amenities, and nice cafes.”
King adds that while this area’s been maligned in the past, affordability pressures are making buyers consider it again. No-go areas he highlights are Doncaster – which saw a massive influx of foreign investment money two years ago, and is now seeing significant softening – and volatile ultra-prestige suburbs like Toorak and Hawthorn.
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