Will Melbourne market perform worse than Sydney?

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Those looking to invest some funds into the Melbourne might have to play it by ear, as conflicting outlooks for the city’s housing market surfaced at the start of the year.

Melbourne is likely to surpass Sydney’s housing downturn and become Australia’s worst city in terms of housing price drops in 2019, according to the Fourth Quarter Housing Forecast Report from CoreLogic and Moody’s Analytics.

The study projected a home price decline of 3.3% in Sydney and an up to 6% fall in Melbourne, mainly because of the inner-city markets’ performances.

The prediction follows the downward trend of Sydney’s housing market, which slid 5.8% in 2018 after having increased by 12.8% in 2017. The capital, though, is forecasted to recover slightly when it comes to apartment values (which dropped by 2.9% last year), according to an article published by realestate.com.au.

“Peaks and troughs in previous cycles have been steeper for houses, which in part reflects the difficulty in unlocking new supply; conversely, apartment supply tends to outstrip house supply in Sydney,” said  Katrina Ell, Moody’s Analytics economist.

According to Ell, there is a high level of supply for apartments in the inner city and surrounding areas as well as homes in suburban areas due to land releases and removal of some development restrictions. This will play a part in the predicted slowdown in 2018 and 2019.

Moody’s also reported that values in Melbourne’s inner east had declined 12.5% from their peak in July 2017, while house values in the city’s inner south and inner metro area have decreased 11.3% and 8.3%, respectively.

Realestate.com.au Chief Economist Nerida Conisbee, in an interview with news.com.au, contradicted the negative predictions for Melbourne, noting that Victoria’s capital is unlikely to beat Sydney’s downturn any time soon.

She said that realestate.com.au is scheduled to release new figures next week, and these would oppose CoreLogic’s predictions.

“What our numbers are showing is that the downturn isn’t as severe as the data coming out of CoreLogic — from its peak, we’ve seen a 5.7 decline in Sydney and 2.5% in Melbourne from the peak, which is far less of a decline,” she said.

Conisbee said that Sydney has already overtaken Melbourne, and this condition should remain for the next six months.  In addition, the decrease in buyer activity is consistently greater in Sydney than Melbourne.

Rental demand in Melbourne is encouraging, and many of its suburbs are on the list of most views per listing, she said. These include Red Hill and Middle Park. Hence, although prices are consistently sliding in Sydney, pockets of Melbourne are able to delay falls in values.

Conisbee also said that some areas of Melbourne had even recorded a price increase over the last 12 months, especially in the city’s west, which has risen by 2.2%.

“Not all Melbourne areas are doing badly, and there’s a lot more strength in Melbourne than Sydney,” she said.

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