While the Melbourne market continues its descent, suburbs in regional Victoria are heading in the opposite direction
In a bit of good news that should have Melbourne investors breathing a sigh of relief, the city’s property price decline is easing up. According to CoreLogic data, values went down by only 0.3% in the month to May 2019 – the lightest drop for a year.
Auction clearance rates in June 2019 were at approximately 60%, a more comfortable result than seen for some time. This improvement has contributed to a stronger overall performance for the national market.
Steps taken to address the issue of borrowers meeting serviceability requirements for financing loans are primed to boost market demand again, along with lower interest rates.
“One of the factors contributing to less activity in the housing market has been the challenges involved in accessing credit. While there are a variety of other policies that will continue to keep a lid on housing credit, a more practical assessment of borrower servicing capacity is certainly a positive for housing market demand,” says Tim Lawless, head of research at CoreLogic.
“Lower interest rates may not provide the same level of stimulus as we have seen in the past due to tighter credit policies, but no doubt, lower rates will still provide some positive influence over the housing market.”
Despite the cooling of the market, Real Estate Investar CEO Clint Greaves notes that Victoria remains one of the more popular areas of Australia.
“Given the well-publicised cooling led by the Sydney and Melbourne markets, we would expect to see more searches for investment opportunities in regional markets and the other states; however, with a few exceptions, this has not been the case,” he says.
“Regional Victorian markets are a good example of where we are seeing strong interest and high levels of investment searches outside of the main Sydney and Melbourne markets.”
Demand in the regional pockets is evident from the improved performance of areas like Geelong and Ballarat. CoreLogic’s quarterly Regional Market Update for March 2019 shows that house values increased by 0.4% in the year to March 2019, while unit prices jumped by 5.4%.
“Metropolitan prices definitely seem to have reached a peak, but regional cities, particularly those within a reasonable drive of Melbourne, seem to be faring well,” says Rocket Property Group CEO Ian Hosking Richards.
SUBURB TO WATCH
ORMOND:
Located just 12km from the Melbourne CBD, the suburb of Ormond enjoyed a period of strong growth before prices began to falter in recent years.
The unit market has held on, with values remaining flat in the 12 months to May 2019. However, it was a different story for houses, with prices tumbling by 20.1%, though the median value is still high at over $1m.
Units also fared better than houses in terms of the rental market, as rents rose by 2.6% to reach an average of $390 per week in the year to March 2019. House rents rose as well, though slightly less; they increased 1.6% to push average rents up to $630 per week.
Units: Units continue to outperform houses in terms of both prices and rental rates
Price: After a 20% decline, the median value of a house in Ormond is still over $1.2m
