How’s The Market | Melbourne Update
In This Week’s How's The Market | Edition 99
How’s The Market | Melbourne Update
The Perfect Blend : Classic Charm Meets Modern Comfort
Auction volumes continue to ramp up
How’s The Market | Melbourne Update
I love what I do…
I find it so interesting to watch markets move and swing and move and swing they have.
Looking back, many of the predictions of what would happen to Australia's real estate market have been incorrect.
During the early months of March 2020, there were predictions of a 30% collapse in house prices across the country, when over the next 18 months, there was nearly the opposite.
Then when rates started rising, many major banks, economists and other professionals were predicting huge price drops.
Then they made these same predictions again a few months later calling it the fixed rate mortgage cliff and prophesied Armageddon during Oct 2022 when a large majority of people were coming off fixed interest rates of circa 2% and onto 6%+.
These things never happened and over the last 5 years, Australia’s real estate market as a whole has seen significant growth.
However, Melbourne has been the sleeping city with prices remaining mostly stagnant and even experiencing a reduction of up to 3% across some sectors.
Affordable Markets Vs Top End
The affordable end of the market dominated growth through 2024. Nationally, lower quartile values were up 9.9% over the year compared to the 2.1% rise seen in the more expensive upper quartile - CoreLogic
Whilst Melbourne as a whole may not have seen growth, we have still seen strong competition in the affordable market under $800k.
Additionally, we have seen properties in the $2m - $3m sector struggle the most overall and have come back in some suburbs by $200k - $300k.
Comparing Melbourne To Sydney
Below are two graphs showing the disparity of prices between Melbourne and Sydney over the long term. The first graph focuses on the relative prices over the last 10 years, whereas the second showcases the difference over the last 35 years.
The second graph shows that Melbourne is now 40% cheaper than Sydney and the long term average is approximately 28%.
Whilst this doesn’t mean that Melbourne is going to catch up, it does show that Melbourne may be intrinsically undervalued.
Why Has Melbourne Underperformed?
There are a multitude of factors that have influenced Melbourne's fall in prices whilst other states have experienced back to back years of double digit growth.
Some of the leading causes can be seen as:
The after effects of Melbourne's strict lockdowns. 7,606 businesses closed down in Victoria during the financial year 2022-23.
Land Tax - this was increased to try to recover some of the funds spent during the covid pandemic. Combined with increased interest rates and falling property prices, this was the straw that broke the camels back for many investors, causing up to 70,000 investors to sell their properties in Victoria between June 2023 - June 2024.
Tenancy laws also became stricter since Covid increased costs to hold properties.
Many investors left to put their money and borrowing power into other states.
The above factors have resulted in increased supply relative to other states giving buyers more choice and cutting competition.
Demand Is Increasing And Supply Is Falling
Victoria’s population is growing at near-record levels, increasing by over 183,000 people in the 12 months to March 2024, which is the biggest jump of any state in Australia.
This has mostly occurred from overseas migration, and for the first time since 2020, Victoria has also managed to attract people moving from other states.
At the same time, only 172,000 dwellings were completed in 2023, marking the lowest annual completions in a decade.
Construction timeframes have also increased, with new houses taking 12 months to complete and apartments requiring 29 months on average. These delays are attributed to labour shortages, rising construction costs, and planning constraints.
This will leave Melbourne behind our targets and with a gap between the required supply and expected demand.
What Are The Predictions
KPMG have predicted a 3.5% gain for Melbourne house prices in 2025 and a further 6% gain in 2026.
Oxford Economics recently predicted that Melbourne house prices will have risen by 21% by June 2027 bringing the median house price to $1.28m.
Domain has forecast Melbourne's house prices to rise by 3% - 5%
SQM Research predicts a decline in values between -5% and -1%
What The Agents Are Saying
Demand is kicking off strong in comparison to Dec 2024.
We have experienced multiple properties this week that have sold with multiple offers in less than 7 days on the market.
Especially in the sub $1m market.
One property we missed out on for a client was online for 4 days and ended up receiving 35 groups through the weekend and 13 offers.
Another was online from Wednesday last week until today and received 5 offers.
Multiple properties that were scheduled for auctions at the end of Feb or early March are receiving early offers and selling prior.
However, price points play a major factor here.
Properties above $1.5m are receiving a lot less attention and are selling in more so a normal market.
All are interested to see what effects interest rates will have on the market
The Wow Factor!
2 Kerr Crescent, Camberwell, Vic 3124
This four-bedroom Californian bungalow on the outskirts of the famous Sunnyside Estate offers a perfect family lifestyle in opulently expansive proportions, combining the elegance of the time with contemporary amenities.
The house greets visitors with a lovely shingled gable façade and transports them to a romantic realm of shiny hardwood floors, striking timber details, elegant leadlight windows, and elaborate pendant lighting.
Against the backdrop of an enchanted dual-sided fireplace, a large dining room and an elegant formal lounge area seamlessly combine to entertain guests in a sophisticated setting.
The house, which has a parking, roof storage, and a laundry, is a charming place to live with modern conveniences for a modern family.
Price Guide: $2,480,000 - $2,680,000
In The Media
Auction volumes continue to ramp up
With 1,712 auctions conducted last week throughout the combined capitals, the number of residences going up for sale is still increasing. This represents a significant increase over the 1,390 residences that were put up for auction the previous week and over the 1,642 properties that were put up for auction a year earlier.
They anticipate that the number of auctions will continue to increase, going up a little this week to about 1,750 before soaring to about 2,450 the next week.
As auctions recover from a seasonal slump, clearance rates become more significant, indicating a better fit between buyer and seller expectations.
Melbourne recorded the largest number of auctions, with 685 homes taken to auction last week, of which 68.4% have been reported as sold so far; the highest preliminary clearance rate so far this year.
The volume of auctions in Sydney surged from 453 to 642 last week, reaching a preliminary clearance rate of 73.0%, the highest since September 8th last year.
Brisbane led smaller auction markets with 211 homes sold, with an early clearance rate of 50.7%. Adelaide's 102 auctions had a preliminary clearance rate of 63.3%, while Canberra's 62 auctions reported 64.1% success.
Final Thoughts
Melbourne, however, has been the outlier a sleeping city where prices have largely stagnated and even dipped in some areas. Will it wake up in the coming months? Only time will tell. But one thing is certain: the market will continue to move and swing, as it always does.
If you or someone you know would like assistance to buy this year, book in a call and we can discuss if we can help.
Thanks for reading this far!
We value feedback and if you have any suggestions on what you would like covered in the future please email me at tristan@tomii.com.au
Happy Buying!
Note: This is general advice and does not take into consideration your objectives, situations or needs. Please consider if this advice is suitable for you and your circumstances and speak to a professional before making any financial decisions.
