Melbourne's property prices may be faltering, but economic clout and population growth will underpin consistent demand
Very high prices have taken their toll on the Melbourne market, putting a ceiling on growth potential in the CBD and inner ring.
CoreLogic’s Hedonic Home Value Index shows that over the three months to May 2018 Melbourne has lagged behind even Sydney in terms of performance. However, Melbourne still has a lot going for it.
“The Melbourne property market is down but not out. Even though it is taking a breather after five years of exceptional growth, there is no sign of a collapse in sight,” says Michael Yardney, CEO of Metropole Property Strategists. “While Melbourne’s property prices are likely to fall by around 3% this year, they will be underpinned by a robust economy, jobs growth and Australia’s strongest population growth.”
The number of jobs available in the area increased by over 70,000 in 2017, reflecting the strength of the local economy. This in turn has brought in migrants looking for opportunities – Melbourne opens its doors to 35% of overseas migrants to the country. By 2031, it could overtake Sydney as the biggest Australian city.
“Melbourne now rates as one of the 10 fastest-growing large cities in the developed world, with its population likely to increase by around 10% in the next four years,” Yardney says.
Middle ring has most potential
Given the lack of affordability in suburbs close to the CBD, the middle ring is expected to take centre stage.
“The more affluent middlerings suburbs which are going through gentrification are likely to exhibit the best property price growth,” Yardney says.
“[Moreover,] the ripple effect of house price growth caused significant house price growth in Melbourne’s outer suburbs over the last few years. As Melbourne residents trade their backyards for balconies and courtyards, villa units with renovation potential and townhouses in Melbourne’s middle-ring suburbs will make excellent investments.”
Property consultant firm Urbis also reports that the middlering suburbs of Melbourne have been performing admirably with the support of considerable infrastructure investment.
“The future supply pipeline in the middle ring continued to grow; however, inner-city future development prospects slowed with the upcoming elections and competition from hotel and office development,” Urbis notes in a media release on the findings of a national survey conducted in March 2018.
SUBURD TO WATCH
ASHWOOD: Premium suburb for unit tenants
The suburb of Ashwood is going from strength to strength as this premium spot enjoys increasing attention from buyers interested in living near Melbourne.
The median house price is nearing $1.5m, and the average rental rate is $480 per week. However, the growth trend does not seem to be slowing down, with the house and unit markets recording a 10.7% and 7.7% increase in prices respectively. Apartments also seem to have caught the attention of renters – the average rental rose by 9% to $485 in the 12 months to March 2018.
Ashwood is so named because it rests between the suburbs of Burwood and Ashburton. It contains two shopping centres.
Location: Situated 14km form the CBD, Ashwood is surrounded by larger suburbs
Rentals: The unit rental market is strong, with landlords charging up to $500/week
