Over the three months to September 2016, Melbourne has been recording auction clearance rates of over 75%, with nearly 1,000 auctions held in September.
This is partly attributed to the significant upswing in population. Melbourne (along with Sydney) recorded the strongest population growth of all the capitals, and this is fuelling greater demand for housing and boosting property values.
However, first home buyers are struggling to get a foothold in the property market. The asking prices for houses and units in Melbourne are more than 10% and 6% higher, respectively, than last year.
This may be attributed in part to the decrease in the number of listings on the market. Faced with limited choices, buyers flock to auctions, increasing clearance rates but also aggravating their buying difficulties.
“In 2015 we saw a massive spike in volumes and prices, but as [2016] has unfolded, there’s much less stock on the market,” says Mike McCarthy, director of Barry Plant.
“When stock gets tighter, agents are madly chasing listings. They try to ‘buy’ the listing by suggesting they can get a higher price.”
The ABS also reports that buyers in Victoria are taking out bigger loans than before; the average loan amount is almost $350,000.
“There’s a large chunk of them who can’t afford to live in it, [but] can afford to live at home and have an investment property,” says Alan Oster, chief economist at NAB.
Market thrives in coveted locations
Melbourne is a city with many micro-market environments that operate separately to each other.
For instance, regardless of price, the inner-eastern suburbs of Melbourne continue to see strong demand. Specifically because of their proximity to the highly desirable Balwyn High School zone, prestige properties in Balwyn, Balwyn North and
Deepdene are priced at $3m–$4m, which is 15–30% more than the cost of similar homes outside this zone.
However, properties priced just slightly lower (in the region of $2.5m) are selling slowly, which many experts attribute to the lending restrictions placed on overseas buyers.
Even with the slowing of the market as a result of these restrictions, Chinese investors still define the building landscape in inner-eastern Melbourne. Established post-war style homes are being bought up and torn down to make room for the types of properties that strongly appeal to the Chinese market – modern dwellings situated on small blocks of land that generally spend only a very short time on the market.
Meanwhile, units in the $500,000 to $1m price range are the biggest sellers in the market, with purchasers ranging from first home buyers to downsizers.
There’s plenty of stock of these properties, and they are popular because of their lower price point. Seddon and Yarraville in the inner west of Melbourne are two suburbs that currently appeal to buyers because of their affordability. The rezoning of Sunshine and Sunshine North has also helped drive growth.
Affordability issues in the outer ring
Buyers are increasingly active in Melbourne’s outer west. Suburbs like Point Cook, Truganina and Wyndham Vale, for example, have recorded many transactions over the past year.
In the east, where 600–800sqm blocks are the norm, suburbs such as Wantirna South offer properties for between $750,000 and $950,000. This area is mainly populated by families and investors, and there are many local schools and amenities.
First home buyers looking to outereastern areas also favour large dwellings in the $500,000 $550,000 price range in suburbs such as Healesville, Upwey and Tecoma, while those considering the southeastern region go for recently built estates that are reasonably priced at around $400,000.
In Echuca, low stock of inexpensive homes has caused prices to rise further. “There’s an increasing number of off market transactions as agents have buyers ready along with upward pressure on pricing and in some instances some increased pricing for rural residential properties in close proximity to town,” says Herron Todd White.
“The tighter supply conditions have been seen through most market segments with several significant larger sales which appear to have been buoyed by lower interest rates and an expectation that they will remain low in the short term.”
SUBURB TO WATCH
South Yarra: Entertainment hub rediscovers its swagger
South Yarra, located around 5km south of Melbourne, is a suburb in high demand, and prices are the highest they’ve been in 10 years.
The median house value in South Yarra has risen by almost 9% to $1.7m, helped in part by the constant improvements in amenities.
Toorak Road is becoming the site of many restaurants, bars and shops. This attracts young professionals to the suburb, especially those looking for renovated cottages.
Chapel Street is also regaining its popularity as an entertainment strip, and the Prahran Market is the place to get fresh produce.
Families will appreciate the presence of several schools in and around the suburb, as well as the parks and gardens found in the Domain precinct.
