Despite recent growth, the state could soon feel the effects of an industry slowdown
By all accounts, Melbourne’s property market is charging ahead. Both the house and unit markets in this capital city reported over 2% growth during the June 2016 quarter, and despite ongoing oversupply concerns, apartments are experiencing remarkable growth.
In the metro area, art deco and period units are especially high priced, according to research conducted by buyers’ advocate Secret Agent. Here, three-bedroom apartments have sustained a five-year hold at the top in terms of capital growth – recently, the median price for such properties climbed 21.5%.
Meanwhile, Domain chief economist Andrew Wilson has highlighted an increase in the listings per sale ratio of one- and two-bedroom apartments situated right in the Melbourne CBD. He notes that inner-west and south suburbs are gentrifying, thereby limiting the ability of supply to keep up with demand.
“In Melbourne we will see lower numbers of apartments in the CBD, but increased pressure for medium- and high-density development on the inner-suburban fringe,” Wilson states.
Indeed, while Victoria reported significant development activity over the 2015–16 periods, this is expected to scale back in 2017 by 17%.
Diverse drivers of growth
Affordable homes, job growth and infrastructure development are just some of the positive factors that could keep Melbourne afloat.
“One of the main drivers of demand in Melbourne is lifestyle,” states Herron Todd White in the Month in Review report for August 2016.
“Melbourne is a diverse city, offering all types of lifestyle choices. Demand for residential properties within close proximity to the beach is one of the major drivers in the Melbourne market, which can be seen by the high prices at which properties are sold in suburbs along the south eastern coastline, such as Brighton.”
The unit market in the bayside suburb of Brighton reports the most significant gains, as house prices rose by over 20%, CoreLogic research shows. According to agent Ben Vieth of Buxton, buyers of such properties are either downsizers wishing to remain in the area or those looking to get into this prestige market without spending too much.
Vieth adds that the most sought-after properties in Brighton for the past three years were ’60s and ’70s-style single-level, two- or three-bedroom villas.
Strong apartment demand
This ongoing demand for apartments is attributed to affordability, especially in the inner city, while inexpensive estates on the fringe of the city are experiencing a boost as well.
For instance, the ABS regards Cranbourne East as the fastest-growing suburb in the state, with the number of residents increasing by 88 people per week over the previous fiscal year.
Other suburbs are expected to strengthen as a result of development. The upgrades to the Western Ring Road should boost property values in the suburb of Epping, as should the provision of new services on the South Morang train line. The extension of this line to Mernda, which should be completed in 2019, has also enhanced this suburb’s appeal.
“A big driver for Victoria’s property market is employment across a range of industries. Over the 12 months leading up to June 2016, Victoria created a record 87,800 full-time jobs. This was the state’s biggest annual job growth since June 1989 and actually surpassed the remainder of the nation collectively,” states Herron Todd White.
Despite a significant loss of employment opportunities with the imminent closure of some plants, such as that of Ford, the state government has allocated a significant budget to job creation and infrastructure development in regional areas.
SUBURB TO WATCH
Northcote: Melbourne’s northern neighbour hits a good stride
In the past few years, Northcote has become quite popular for the social lifestyle it offers its residents. This city suburb is located just 6km north of Melbourne, and its house market has seen over 10% growth in the past 12 months alone.
As a result of gentrification, properties here are highly priced. Nonetheless, residents certainly get their money’s worth given the proximity to the city and various amenities. Northcote is the site of several large parks, which contain facilities for skating and other sports, as well as playgrounds and picnic areas. All Nations Park is also adjacent to Northcote Plaza Shopping Centre. There are several primary schools in the suburb, as well as a college and a high school.
Commuting is convenient because Northcote is home to five railway stations, through which two train lines run. There are also trams and buses running through this area.
