Melbourne races past Sydney to become the country’s best-performing property market
So it wasn’t just a fluke. Melbourne’s small gain over Sydney last month was not just a one-off performance. It has turned out to be a precursor of what’s to come.
According to the latest CoreLogic RP Data figures, Melbourne dwelling prices surged 4.9% in July alone, clearly outperforming Sydney’s 3.3% growth. Over the three months ending July, Melbourne jumped 6.1%, well ahead of Sydney’s 5.1%.
The main reason is affordability. At the current median house price of $630,000 against Sydney’s $921,500 (CoreLogic RP Data), Melbourne is almost $300,000 cheaper than Sydney. It’s also clear that Melbourne’s fundamentals have strengthened significantly.
“Growth conditions have picked up over the past three months, with Melbourne recording a higher rolling quarterly rate of growth than Sydney,” says Tim Lawless, head of research at CoreLogic RP Data. “Detached houses continue to be the main driver of Melbourne’s appreciating home values.
House values were 12.3% higher over the year compared with a 4.8% gain in unit values.”
Domain’s numbers show similar strong performance, recording 3.5% median house price growth during the June quarter. Unit prices also grew strongly at 3.2%.
“The strong price growth in the Melbourne market over the last 12 months has been generated primarily by aspirational buyers, particularly in Melbourne’s eastern suburban regions.
Rising buyer activity in suburbs west and north of the city also contributed to the house price growth,” says Andrew Wilson, chief economist at Domain.
While the negative impact of the recent apartment-building boom is set to play out, Wilson says there are a number of factors contributing to Melbourne’s stellar performance.
These include:
- Improving local economy
- Falling unemployment
- Low interest rates
- Rising confidence
- Surging population
- Increased investor activity
“These have been key ingredients in the Melbourne market’s upswing this year,” says Wilson. “It was a surprise to see it surge back this year after trending down towards last year. It has certainly picked up a lot thanks to the recent two interest rate cuts.
“A lot of investors are now looking at Melbourne. I think there’s a lot of entry-level opportunity in Melbourne at the moment, especially for new houses on the fringes. Suburban units also have reasonable prospects.”
Just like in Sydney, Melbourne’s strong performance is spreading outwards to the budget suburbs, which have missed the party during the past three years because of a shake-out in the manufacturing sector.
“There were concerns about unemployment and job security, which kept these suburbs on the sidelines. They’re up and running now. They’re recording a healthy auction clearance rate over July and are on the rise.”
While the auction clearance rate has also tracked back a bit in July, Wilson believes it’s simply a seasonal factor.
“The Melbourne market generally goes on a buying holiday through July and then it starts to pick up again in August and September.
“I think Melbourne still has a reasonable spring market, given its affordability compared to the Sydney market and also the upside of the budget markets, which have been flat till this year,” he says.
Suburbs in the Banyule and Moreland areas have led the top performers during the past 12 months. Briar Hill recorded an impressive 19% growth in the median unit price, followed by Pascoe
Vale. Buying momentum has continued strongly in Niddrie, with unit prices soaring by 22% during the past three months alone. During the year ending July, prices jumped by a whopping 22%.
SUBURB TO WATCH
Bayswater: Underrated Melbourne suburb
Residents of Bayswater love the fact that it has affordable properties yet doesn’t compromise on quality. Bayswater is 29km east of the Melbourne CBD and benefits from having a great range of shops, restaurants and schools.
If residents need something that’s not there, more excellent amenities can be found in neighbouring Wantirna South, including Westfield Knox. This shopping centre has recently announced a $450m expansion due to begin in 2016. This will make it Australia’s second-largest shopping centre and it is expected to create more than 8,000 jobs.
There is also just 0.7% of unit stock on the market, according to DSRdata.com.au. Furthermore, the vacancy rate is just 1.2%, indicating that investors shouldn’t have a tough task finding a tenant.
In particular, there are a great range of units available close to the railway station. Three-bedroom units on Elm Street are close, but not too close, to Bayswater train station, so residents shouldn’t be affected by the noise. They are also perfect for small families and are near to shops and schools. They can be bought for less than $500,000.
Meanwhile, two-bedroom units can be bought on Myrtle Street for $430,000 and are also a short walk from shops and transport.
