New Year Fireworks As Melbourne Property Heads To Record Highs
Melbourne has recorded its highest monthly property price increase in ten years.
According to CoreLogic’s Home Value Index, the Melbourne market rose by 2.3 per cent in October, the biggest month-on-month gain since the period following the global financial crisis a decade ago.
Over the past three months, Melbourne has been the standout performer across all capital cities, with prices leaping 5.5% in the last quarter alone.
Prices are now only 5.8% below their 2017 peaks and are on track to surpass those highs early in the new year.
Underpinning much of the strength has been strong auction results, with clearance rates regularly above 75%, and a tight rental market, with the vacancy rate currently sitting at 2.0%.
James Nihill, Managing Director of Patrick Leo, said that despite the price rises there are still ample opportunities for astute investors to capitalise on a buoyant market.
“There is no denying that Melbourne is the top-performing capital in Australia right now in terms of home values and growth.
“With a median house value of $650,197 it is still relatively affordable for investors but as always it comes down to the timing, as Melbourne is already on the way up and investors who buy now aren’t getting in at the best price point, so location is critical,” Mr. Nihill said.
Lower mortgage rates and improved credit availability are among the primary drivers of improvement in buyer demand.
Melbourne’s housing market is on track to reach its previous highs by January, while values across the Victorian capital’s inner precinct were only 1.5 per cent below their peak in October, with this part of the city poised to reach a new valuation benchmark by December.
While price growth always excites investors and disturbs first home buyers in equal measure, there were still areas that offered more promise to both sectors of the property buying community.
“The risk is in seeing that Melbourne is on the rise and thinking any investment property will inevitably reflect this,” Mr. Nihill said.
“It is essential to identify emerging areas that will offer additional prospects for growth.”
“Banks have identified some areas at risk of apartment oversupply, such as Southbank, so investors need to take heed.”
For entry-level buyers, there were still strong prospects in terms of current price and the potential for capital growth.
“The outer fringe shows good prospects due to its affordability and expanding infrastructure, with areas such as Werribee earmarked for growth,” Mr. Nihill said.
“For those perhaps already established in the property market, closer to the CBD there are good opportunities in more established suburbs like North Melbourne, Collingwood, Ringwood and Croydon that continue to attract strong tenant demand.”
There is also renewed buyer interest in bayside suburbs across Melbourne, with buyers taking advantage of double-digit price falls in some of the most sought-after seaside areas.
In coastal suburbs around Port Phillip Bay, between Sorrento and Williamstown, median house prices fell by as much as 16 per cent over the year to September, compared to the previous year.
Lower interest rates also mean that servicing a mortgage on a unit is now cheaper than renting in 19 Melbourne suburbs.
Perhaps reflecting the perceptions of an oversupply, apartments in inner-city locations offer the biggest opportunity, with CBD owners able to save about just over $100 a week on their unit repayments compared to renting.
Areas of regional Victoria are also now on property investors’ radars. The largest annual gain was made in Indigo Shire, in the north-east of the state, which includes the towns of Beechworth, Chiltern, Rutherglen and Yackandandah.
The median price rose 15.2 per cent over the past year, and 47.2 per cent over the past five, to $397,500.
Greater Shepparton had Victoria’s next highest growth, soaring 14.4 per cent over the year.