Till the very last minute, 2015 was a bumper year for Melbourne property vendors. Real estate agents scheduled more than 8,000 auctions in the six-week period leading up to Christmas Day, even booking auctions on Sundays and weekdays to make the most of the busy selling season.
“After December, a huge drop in the number of auctions [scheduled] means buyers that failed to purchase before Christmas are forced to wait until auctions in February 2016,” says Greville Pabst, CEO and co-founder of WBP Property Group.
“Add the prolonging of settlement dates and buyers become anxious they won’t be able to move into a new home until May. The result of this was a solid December where the market seemed to remain reasonably strong.”
Indeed, house value growth was in the double digits for 2015 as a whole, while apartments also performed well, albeit not as strongly as free-standing homes.
“Melbourne is clearly the second highest capital city housing market, still well behind Sydney,” says Domain senior economist Andrew Wilson.
“The recent strong capital city property markets of Melbourne and Sydney are now recording weaker price growth, with low interest rates, previously a key driver of the market, gradually losing impact … and the capacity for house price increases is moderating.”
One in four Australians live in Victoria
Despite predictions that Melbourne real estate won’t enjoy the same level of capital appreciation in 2016 that it did last year, experts still expect Melbourne property investors to experience decent growth in 2016, and likely next year as well.
The city of Melbourne overall is expected to have ongoing positive growth well into the middle of the year, with the Australian Housing Outlook 2015–2018, prepared by BIS Shrapnel for QBE, predicting that the median house price will reach $770,000 by June 2016.
This forecast is loosely tied to the city’s strong population growth, which is considered a strong indicator of future capital growth. More residents means more demand for property, which should translate to pressure on property prices.
In its recent Business Outlook report, Deloitte Access Economics confirms that, by this measure, Victoria is streets ahead of all other states and territories.
“Although the state’s population growth is a little off its highs [at present], there have been huge slowdowns in Western Australia and a notable slowdown in Queensland, leaving Victoria as the undisputed national leader in terms of its rate of population growth,” Deloitte reports.
“It’s ranked second only to NSW as a magnet for the migrants of the world, with net overseas migration adding around 55,000 people to the state’s population in the last year alone.”
Deloitte estimates that Victoria currently accounts for around a quarter of Australia’s population; for the first time in over 20 years one in four Australians can call Victoria home.
Warning signs for Melbourne
Although Melbourne’s immediate outlook appears positive, Pabst warns that there are several factors conspiring to create a negative impact on market sentiment.
The first is the major banks’ tightening of criteria for investor loans and then increasing rates across the board, which had people expecting the RBA to lower the official rate to accommodate the changes on Melbourne Cup Day last year.
When the RBA failed to do so, it “resulted in a slight negative sentiment in the market”, Pabst says.
“The investment market has slowed a touch due to the banking changes over the last six to nine months. Many investors have reduced budgets now due to the lending requirements, and this has reduced some demand – and therefore in some cases reduced vendors’ asking prices,” he confirms.
“Sales are also slowing, but they’re moving from fantastic to very good ... and in certain categories, such as fully renovated houses and homes, the market continues to improve.”
Real estate agent Mark Schroever from Barry Plant, Boronia, says that “a little more stock coming onto the market” is also helping to rebalance the market.
“Buyer demand hasn’t dropped off at all and still remains strong,” he adds.
SUBURB TO WATCH
St Albans: Bright future ahead for affordable suburb
A neighbourhood in the process of gentrification, St Albans is welcoming a younger demographic looking for affordability and easy access to the city, which is 16km southeast. A median house price of just over $400,000 makes St Albans a remarkably inexpensive middle-ring suburb.
Alongside its proximity to the Melbourne CBD, St Albans’ major drawcard is its excellent public transport system. Teeming with buses and with a direct rail line into the city, St Albans is undergoing significant upgrades to its infrastructure, with its train station set to be rebuilt underground to ease traffic congestion and improve safety.
St Albans also has all the amenities local residents desire, including a large local shopping centre, a library, a leisure and swimming centre, and a modern cafe and dining strip.
For families, there are a large number of schools – some ranked in Melbourne’s top 10 – as well as a Victoria University campus. There are also abundant recreational facilities, including a skate park, playgrounds and large open parks on its east and west borders.
St Albans is a large suburb with a population of 35,000, and finding the right area within it is important. There are less desirable pockets of the neighbourhood that are best avoided, but the majority of its streets are leafy and quiet.
There is strong predicted growth for this suburb as its qualities and lifestyle continue to attract future buyers.
