House and unit markets in Melbourne are moving in two different directions, with houses in highest demand
Melbourne recorded a first when its median house price surpassed $800,000 over the March 2017 quarter, boosted by strong auction and private sale performances.
“Melbourne’s property market is experiencing a perfect storm, with price increases driven by strong buyer demand, solid population growth, record-low interest rates, and low stock on market,” says Joseph Walton, president of the Real Estate Institute of Victoria.
“Competition for homes, particularly in Melbourne’s inner and middle rings, has encouraged more vendors to take their home to market, with multiple auction records falling this year.”
House market growth primarily came from middle-ring suburbs, such as Templestowe, although outer suburbs like Cranbourne North and Kilsyth were among the top growers in the city as well. House prices also sailed past $1.5m in the premium suburbs of inner Melbourne.
While demand has continued to exceed supply, April 2017 findings show that the market slowed slightly following the remarkable March showing, with prices rising by only 0.5%. According to CoreLogic data, this softening of dwelling values came after a period of significant capital gain, which lasted from the second half to 2016 through to March 2017.
Units struggle
In contrast to the house market, apartments seem to be struggling to maintain long-term demand, with resale values rising particularly in inner-ring areas such as Southbank, Docklands and the Melbourne CBD.
“A lot of the stock being built has been targeted towards the investor segment. So the people that are living in these units are ultimately renters – they’re not committing to staying long-term,” says Cameron Kusher, research analyst at CoreLogic.
“People are wanting to be close to work and to all those amenities, but I think a lot of the units being built are very small, and once you get married and have a child, you’d quickly find out that you don’t have that much space. So that’s one concern: the type of product that’s being delivered.”
Kusher considers this situation to be the effect of high levels of unit construction in Melbourne, even as apartment living increases in popularity. Downsizers seem to be competing instead for rarer single-level homes. Moreover, demand is spreading to the western and northern suburbs, which are more affordable.
In the auction market, these regions are among the top three most successful. Domain reports that auction clearance rates for the west and the north hit 81.6% and 86.5%, respectively. The northeast region was the top performer, with a clearance rate of 89%.
SUBURB TO WATCH
Mickleham: Affordable pocket attracts buyers
Just beyond the Urban Growth Boundary of Melbourne sits the suburb of Mickleham. The decline in the house market over the past five years has resulted in a median price of just over $400,000, making this suburb an affordable pocket.
Rental returns come in at an average of 4.7%, so investors will be getting bang for their buck. The suburb is also just about 10 minutes away from the hub of amenities in nearby Craigieburn, meaning residents won’t miss out on conveniences such as shopping, sports facilities, schools and dining options.
Craigieburn also offers access to public transport, including several bus routes and railway services. The Melbourne CBD is about a 45-minute drive away.
