Price growth is steady, at 8% for houses and 5% for units
The local economy continues to prop up Melbourne’s housing market.
“Victoria’s total housing finance commitments and new construction finance commitments have continued to grow, despite a slowdown in price growth. This is due, in large part, to strong population and jobs growth,” says Matthew Lewison, director of OpenCorp.
“Victoria has been the big mover in the employment market. This has been helped by the strong construction market, which continues to drive the economy.”
With the increased supply dampening demand, however, pressure on Melbourne’s property prices continues to lift, giving the more affordable pockets of the metro room to breathe.
“Volume at the higher end of the Melbourne market has come off quite a bit, while the more affordable end of the market is still carrying on with plenty of activity,” Lewison says.
Empower Wealth’s director of research, Jeremy Sheppard, affirms that it is low prices that are piquing the interest of buyers, rather than location.
“A lot of the demand for Melbourne property has shifted towards more affordable fringe markets as more and more buyers are priced out of suburbs closer to the CBD.”
Highlighted hotspots include those located in the northeast of Melbourne.
“Despite the lower socioeconomic demographic, Montmorency, Wattle Glen and Doreen are standouts for houses. For units, there’s a cluster of suburbs just west of the city in Flemington, Footscray and Maidstone,” Sheppard says.
Not every affordable suburb is a good deal, and it remains important to stay close to areas that can offer amenities and employment opportunities. For example, Casey and the Yarra Ranges are problem suburbs for this reason.
Low returns in volatile metro
Melbourne’s housing downturn has also resulted in poorer rental returns. CoreLogic’s Total Returns Index shows that yields dropped by 2.4% in the 12 months to July 2018 – the lowest they had been since October 2012.
In the wake of Melbourne’s decline, regional areas of the state have remained steady, with rental returns only falling from 10.4% to 9.8% in the same period. The general stability of the housing market has contributed to these better yields.
Even at its weakest, however, Melbourne’s edge over many of the other capitals is enough to keep it ahead of smaller cities, like Perth, at their best.
SUBURB TO WATCH
ELTHAM: Premium suburb maintains demand
Price tags in the suburb of Eltham 20km north of the Melbourne CBD are quite high, but demand does not seem to be dampened by this.
The median house value hovers close to the $1m mark, while units are valued at almost $700,000. Both types of properties have recorded remarkable growth over the five years to July 2018.
The unit lifestyle appears to be rising in popularity, recording attractive statistics. Apartments spend only 36 days on the market, vendors are able to unload them at an average discount of just 1.8%, and unit rental rates spiked by 10% in the 12 months to May 2018.
Demand: Both houses and units are snapped up by buyers in just over a month
Growth: Eltham’s market has sustained double-digit growth for several years