CoreLogic data from the final quarter in 2018 showed Melbourne’s housing market was the weakest performing capital city in Australia, with property values falling 2.1% over the last quarter. Will the downturn continue into 2019, or will we start to see more favourable results?
Realestate.com.au reports that jobs growth in Melbourne is driving demand for property in the city – particularly from renters – which is helping curb price falls, with property values now down 2.5% from peak (far lower than Sydney’s 6.7%) and 1.5% over the past 12 months.
Compared with Sydney, which is seeing lacklustre demand in many suburbs, a number of Melbourne suburbs are still seeing very high views per listing. Middle Park and Red Hill have made the list for the top 10 in-demand suburbs in Australia, which is unusual for a relatively flat market.
“They’re very attractive suburbs and very tightly held, so they could have a better position than others with tons and tons for sale,” REA Group’s chief economist Nerida Conisbee told news.com.au.
Both suburbs have seen double-digit growth over the past 12 months.
Regionally, Melbourne’s western suburbs are showing promise, with property values increasing 1.8% over the past 12 months – partly driven by new housing developments in suburbs like Truganina and Melton, along with increases in more established suburbs like Footscray and Yarraville.
Cities close to Melbourne are also performing particularly well, driven by demand from first homebuyers and young families. Ballarat, Geelong and Latrobe Gippsland are currently the strongest regional areas in Australia.
Although Melbourne could see a further price fall of around 3% for the first half of 2019, the city is nonetheless shaping up to be an investment hotspot later in the year.
According to a real estate forecast by the Urban Land Institute (ULI) and PwC, Melbourne has come out on top over Sydney to be the Asia Pacific’s best place to invest in property for 2019. This prediction is based on the fact that Melbourne also has a good yield spread when it comes to the cost of debt and sovereign bonds, a deep, liquid core market (i.e. low volatility and good supply/demand), and fair potential for rental growth.
Rental growth in Melbourne is indeed doing well, with the Domain Rental Report for December 2018 showing that house rents had increased by 3.5% over the year to $440 per week.
For those looking to invest, experts agree that an increase in tourism numbers and spending marks a major growth opportunity for investors with short-term lets and apartments in Victoria, as well as people looking to sell to families of international students.
Gil King, CEO of the Real Estate Institute of Victoria, tells Smart Property Investment, “Melbourne was ranked the third-best student city in the world in 2018 and welcomed 200,000 international students in 2017. The families of these students are a big contributor to Melbourne’s tourism success and, in some instances, are incentivised to purchase property here.”
King says first homebuyers and owner-occupiers should also view the Melbourne property market correction in a positive light.
The property boom of 2017 could not be sustained and a levelling or correction of the market is a good thing in the context of housing affordability already being a pressing issue in Melbourne.”
He believes that the market will pick back up later in 2019 as downturns are usually cyclical.
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