A rising population is driving up Melbourne’s capital growth prospects as supply levels settle down
Melbourne seems to be on the path towards overtaking Sydney as Australia’s most populated city.
“Melbourne is a population growth story: there are more buyers than sellers. For quality properties – both houses and apartments – it is not uncommon to see five or six parties bidding aggressively. The four or five who miss out will still require a property,” comments Scott Hall, associate at Cohen Handler.
“As such, Melbourne is also a capital growth story, as more people require more housing.”
While property values continue to go up in this city, the rate of growth has slowed. The oversupply issue in places like the CBD, Docklands and Southbank could also be related to the generic products in these markets. Hall emphasises the need to offer a variety of dwellings in terms of available facilities and size.
“Modern apartments in [these areas] can be viewed more as a financial instrument (bond) than a property – they offer a relatively attractive yield but with very limited growth prospects; in many instances a decrease from the original purchase price,” Hall warns.
“Stock levels are still relatively low, particularly in terms of quality properties. In part, we think fewer properties are coming to market because, as prices have increased the costs of moving, stamp duty, agents’ fees and marketing costs have made staying where you are and renovating a relatively more attractive option.”
Hall tells buyers to identify suburbs that are just starting to gentrify and have renovation potential, which is an opportunity for homeowners to manufacture growth. This initiative could be crucial because landlords cannot easily raise rents in the current climate, with rental affordability in Melbourne being close to a historic low.
Inner city draws a crowd
The inner city of Melbourne continues to command value as one of the most popular choices for young homebuyers.
“More and more young people are turning to Melbourne’s inner-ring markets as a way to maintain their lifestyles and a level of convenience, while finding an affordable entry to the market,” says F.R. Chee, a selling agent from CT Real Estate.
Units in these markets are also attracting a lot of attention because they position residents within close proximity to amenities. The implementation of incentives for first home buyers is expected to boost this demand, especially as new entrants trade in the suburban-home dream for apartments with beautiful city views.
SUBURB TO WATCH
Balaclava: Orthodox Jewish hub struggles with growth
Named for the Crimean War’s battle of Balaclava, this inner-city suburb of Melbourne could be fighting to maintain growth due to high prices.
Late 1870s terraced housing can be found in Balaclava, as well as late Edwardian duplexes. The suburb is just 7km south of the Melbourne CBD, and is home to a significant portion of the city’s Orthodox Jewish community. Thus, many kosher restaurants and shops have been established here. Carlisle Street is the central shopping area, and the suburb is also the site of Caulfield Grammar School.
The Balaclava railway station is a stop on the Sandringham line, and trams stop at several streets, including Carlisle Street and St Kilda Road.
Culture: A large Orthodox Jewish population make their home in this suburb
Convenience: Balaclava is accessible via train, tram, bus and several road networks
