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Melbourne’s property market has been considered a laggard compared to the rest of the country in recent years, but data is starting to suggest that this trend may be changing. Several key indicators suggest that the market is on the brink of a significant improvement.
Melbourne’s property market has been considered a laggard compared to the rest of the country in recent years, but data is starting to suggest that this trend may be changing. Several key indicators suggest that the market is on the brink of a significant improvement.
1. Investor Sentiment
The latest Property Sentiment Survey from API Magazine reveals a dramatic shift in investor sentiment towards the Victorian property market. In mid-2024, when asked which state or territory offered the best investment prospects for the next 12 months, only 8.6% of respondents chose Victoria. By the time the survey was repeated three months later, however, this figure had risen to 25%, with Victoria ranking second in popularity for investment prospects, just behind Queensland and ahead of New South Wales and Western Australia.
2. Affordability
Melbourne's relative affordability is one of the key attractions, especially considering the lack of price growth in the past two years. According to PropTrack's latest Home Price Index, Melbourne is now more affordable than Canberra and Brisbane, and significantly cheaper than Sydney. With a median dwelling price of $790,000, Melbourne is now on par with Adelaide and Perth, while Sydney's median stands at $1.1 million.
3. Market Turnaround
PropTrack’s most recent price report also suggests a market turnaround. It states that price declines in Melbourne are beginning to reverse, with strong buyer activity during the peak of the spring selling season. In October, prices rose by 0.5%, marking the highest monthly growth rate among Australia’s capital cities.
4. Population Growth
Other factors that suggest Melbourne’s property market is poised for stronger performance include population growth—driven by overseas migrants and international students—a stable economy, and a significant pipeline of major infrastructure projects. The latest CommSec State of the States report ranks Victoria’s economy as the fourth strongest in the country, ahead of New South Wales, the ACT, Tasmania, and the Northern Territory. The report highlights the state’s robust construction sector as a key strength.
Population data from the Australian Bureau of Statistics (ABS) reveals that Victoria had the second-highest population growth rate in the year to March 2024, increasing by 2.7%, second only to Western Australia. In absolute terms, Victoria added more people to its population than any other state.
5. Housing Supply and Demand
Melbourne is experiencing a challenge in terms of housing supply and calls for stronger government policies to attract property investors to meet the rising demand.
In a positive development, the recent stamp duty concessions for off-the-plan properties within a strata plan has been welcomed. Data from the off-the-plan property portal urban.com.au has shown a sharp increase in interest, with direct online inquiries jumping by 123% and website traffic soaring fivefold.
6. Rental Property Demand
A further factor supporting investment is the decline in available rental properties, which is pushing up rental prices. For the first time since records began in 1999, the number of active rental bonds in Victoria fell significantly over the 12 months to June 2024, with 22,000 fewer rental properties compared to the previous year.
Higher property taxes, stricter rental property standards, and rising interest rates have led many landlords to sell their properties. The metro areas of Melbourne have seen the largest decreases, with more than 20,000 fewer rental properties, marking a 3.7% year-on-year decline. In regional Victoria, the drop was smaller, at around 1,000 properties.
Rents have increased in every Melbourne local government area over the past year, with some areas seeing increases of nearly 20%. Overall, rents are up by an average of 7.5% compared to the previous year, creating affordability challenges for tenants.
At GREENROCK Advisory, we believe that the above key indicators are aligning to boost the growth prospects for both Melbourne and Regional Victoria in 2025.
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