Melbourne’s property market has been experiencing a slower recovery compared to other Australian cities in recent years.
For the first time in 14 years, Brisbane has overtaken Melbourne as the second most expensive city in Australia while Canberra is also ahead and Adelaide is not far behind.
Here are five key factors contributing to Melbourne’s sluggish property market:
Pandemic Aftermath
The COVID-19 pandemic hit Melbourne harder than other Australian cities, leaving lasting impacts on its property market. Melbourne experienced a big population decrease due people picking up and moving interstate. While closed borders had been weighing on demand for inner-city rentals.
These factors combined to create a more challenging recovery environment for Melbourne compared to cities like Brisbane, Adelaide, and Hobart, which attracted interstate migrants and saw their property markets boom.
We’ve also started to see the government bring in new regulations that have impacted investors and there are also taxes in place that target homeowners that look to recoup the cost of COVID policies.
Slower Price Recovery
While other major cities have surpassed their pre-downturn price peaks, Melbourne’s property values are still lagging behind. As of June 2024, Melbourne’s prices were 3.89% lower than their previous peak, whereas Sydney, Brisbane, Adelaide, and Perth had all reached new price peaks.
This slower recovery has made sellers more hesitant to list their properties, further slowing down the market’s rebound.
Buyers agents in Melbourne are reporting that it has been a buyer’s market there for some time, particularly as listings keep on rising.
Reduced Borrowing Power
Higher interest rates and increased cost of living have also significantly impacted buyers’ borrowing capacity in Melbourne. This has led to more cautious buyers in the current environment, lower auction clearance rates compared to the previous year, and buyers being less likely to pay the high prices seen in boom times.
In June, over half of the properties sold in Melbourne went for the asking price, while more than one-third sold for less. This contrasts sharply with cities like Brisbane, Adelaide, and Perth, where a majority of properties are selling above the asking price.
Seller Hesitation
The slower recovery in Melbourne has made property owners more reluctant to sell. A recent survey from CoreLogic revealed that only 19% of Victorian respondents considered it a good time to sell. This compares to 37% in Queensland and 25% in New South Wales.
This hesitation among sellers has contributed to a slower market recovery, creating a cycle of caution in the Melbourne property market. Buyers agents in Melbourne have also been able to capitalise on this trend by being able to negotiate strongly.
Market Normalisation
Despite the slower growth, Melbourne’s property market isn’t necessarily faltering. Instead, it appears to be undergoing a period of adjustment where prices are normalising after decades of strong growth.
Buyers and sellers remain active in the market, and most market indicators continue to be positive. This period of adjustment may be necessary for long-term market health, allowing for more sustainable growth in the future.
If you want to learn more or are considering buying property, seeking advice from a buyers agency in Melbourne who provide local expertise through qualified Melbourne buyers agents.
