Growth remains solid for Melbourne
In continuing a nearly decade-long trend, Melbourne reports the second-highest annual growth rate out of all the capital cities, according to CoreLogic.
Population growth is a significant factor, as the capital accounts for the majority of the population increase in the country, along with Sydney.
A significant portion of overseas migrants also chose to make their way to Melbourne in 2016, increasing property demand, especially in the CBD.
As with Sydney, however, the growth is expected to slow down over 2017.
As values rise, more and more buyers may be priced out of the city, especially if lending policies are tightened in response. Moreover, many lenders are increasing interest rates independently of the RBA’s decisions, which could affect mortgage refinancing activity.
Nonetheless, Ken Morrison, chief executive of the Property Council of Australia, sees good things happening in Melbourne’s future.
“We are seeing consistent and strong growth expectations across Victoria,” he says.
First homebuyer activity affected
For those buyers on a budget who are seeking homes located within 15km of Melbourne, the options are becoming limited. Braybrook and Coburg North are good options, since some houses can be found for lower than $800,000. Those with deeper pockets can look into Footscray or Preston, with houses priced up to $900,000.
Preston, in particular, is a quick seller along with Reservoir, according to Tony Lombardi, director of Harcourts. Nearby Thomastown, which lies roughly 17km north of Melbourne, offers houses for the median price of just approximately $500,000.
Cate Bakos, a buyer’s advocate, highlights the western suburbs of Sunshine and St Albans. The former is currently undergoing gentrification and prices are increasing accordingly. However, the latter is stocked with houses in the $500,000 price range.
“I think the rate of change that St Albans will enjoy in maybe five years’ time could be similar to that of Sunshine,” Bakos predicts.
Options like this offer opportunities to first homebuyers who have been frustrated by the recent surge in prices. In fact, they have inspired an increase in the number of such buyers in Melbourne over 2016, according to the ABS.
They are moving quickly to snap up properties in the affordable pockets in anticipation of further growth; however, this activity is expected to slow down during this year and next. “It’s never been harder to buy your first home,” states Daniel Cohen, co-founder of First Home Buyers Australia. Factors playing into this include the slow rate of wage growth, increasing rent rates and tight lending policies.
Value growth could also prevent some first homebuyers from becoming eligible for stamp duty concession.
Units drag down growth
While houses are reporting greater growth, units may be able to generate higher returns on investment. Villa units and two-bedroom apartments can go for roughly $500,000 in inner northern Melbourne, specifically Brunswick, Northcote and Coburg.
Consistently performing suburbs in the inner city include Port Melbourne, St Kilda, South Yarra and Richmond, with established apartments expected to be particularly popular compared to new, off-the-plan units. However,
Herron Todd White notes that this market could be risky for buyers since oversupply is a real possibility in the near future, given the large amount of apartments scheduled for completion. Herron Todd White highlights the inner northwestern area of Melbourne as being especially sensitive to this problem. West Melbourne, Travancore and Parkville are danger zones, which have resulted in falling prices.
By contrast, properties in the southeastern corridor are recording considerable growth, following 2016’s surge. In the outer eastern ring, the property market has been steady, although its growth in 2017 may be gentler than 2016’s. Herron Todd White predicts that downsizers will concentrate on large blocks in Croydon, Mooroolbark and Kilsyth, especially those with potential for subdivision. These will also be far cheaper than those in the middle-eastern suburbs.
SUBURB TO WATCH
Wallan: Growth and accessibility lift outer suburb
Traditionally known as Wallan Wallan, the suburb of Wallan has the Great Dividing Range as its picturesque background. It is located 45km from the Melbourne CBD.
It is the fastest-growing town in the Shire of Mitchell, and is well stocked with amenities. These include the Wellington Square Shopping Centre, which contains a major supermarket plus several chain stores. There are a number of schools in the area, including kindergartens and childcare centres.
The suburb is well connected with the V/Line train network, and also has a good bus service for peak hour commuters.
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