Melbourne is shooting for the stars in terms of population growth as the influx of residents props up the market
Like Sydney, Melbourne continues to suffer the fallout of being too expensive for first home buyers, while investors are backing off.
“Today, one in three Melbourne suburbs have a median house price of at least $1m, with 90% of suburbs within 10km of the CBD having a million-dollar median house price and almost 50% of suburbs in the middle ring also in the million-dollar club,” says Dona James-Wells, buyer’s agent at Metropole Property Strategists.
Nevertheless, Melbourne’s outer-ring suburbs have felt the spillover effect of the inner city’s highly priced market. Regional hubs like Geelong have benefited as well. “Moving forward, it is likely that the more affluent middlering suburbs going through gentrification will exhibit the best property price growth,” James-Wells predicts.
“As Melbourne residents trade their backyards for balconies and courtyards, villa units with renovation potential and townhouses will make the best investments.”
Rapid population growth
Melbourne also has an ace in the hole: population growth.
“While future capital growth will be a little slower than in the last few years, Melbourne’s property prices will continue to be underpinned by its strong population growth and the influx of 35% of all overseas migrants,” James-Wells says.
“Melbourne now rates as one of the 10 fastest-growing large cities in the developed world, with its population likely to increase by around 10% in the next four years.”
The city’s plan is to facilitate even greater population growth in the future, which could stave off decline for a while by creating demand.
“We believe that Melbourne still has another six to 12 months of stable, moderate growth before interest rate increases start to bite,” says Matthew Lewison, director of OpenCorp.
“Melbourne has seen incredible population growth, and this will continue. With the very low vacancy rates (2.1%) suggesting that there isn’t much spare capacity in the rental market, buyers are still going to be pushing to get in.”
While there are apartment completions pending in the pipeline, these developments are being released gradually, preventing the onset of oversupply issues.
“With fewer completions coming through the pipeline, the lower end of the market is going to feel very cramped quite soon,” Lewison says.
SUBURB TO WATCH
REDAN: Affordable properties in the city suburb
An inner-city suburb of Ballarat, Redan enjoys proximity to many heritage sites, such as the Ballarat Botanical Gardens, Her Majesty’s Theatre and the Ballarat Municipal Observatory.
Tourism is a strong driver of economic growth in this area, along with the retail industry. Redan residents are close to several malls in the city, including Bridge Mall and Central Square Shopping Centre. Two universities are also located in this suburb – Federation University Australia and Australian Catholic University.
Apartments are quite cheap here, at a median price of less than $250,000, while landlords can rake in yields as high as 5.7%. This follows a five-year period of growth dating back to 2013.
Affordability: Houses and units have a median value of $310,052 and $235,832 respectively
Education: The suburb is home to Federation University Australia and Australian Catholic University