For decades, Melbourne was always known as one of Australia’s strongest property markets, but in recent years it’s been slipping.
According to CoreLogic, the median dwelling value is now the sixth in Australia, falling behind the likes of Perth which is a far smaller and more isolated city. One of the big reasons is that the supply of apartments is rising. But it’s not the only factor.
Interstate Migration
COVID-19 had a considerable impact on Melbourne’s property market. The city experienced some of the strictest lockdown measures in Australia, which led to a huge number of residents leaving the city. Many people relocated to other states and the better lifestyle options.
Cities like Brisbane, Perth, and Adelaide benefited from this trend. This outflow of people not only reduced demand for properties in Melbourne but also contributed to its decreased median dwelling value. As Melbourne’s population declined, other cities saw a surge in demand and, consequently, property values increased.
Growth Rates
Over the past five years, the growth in Melbourne’s property values has been significantly slower compared to other major cities. Nationally, dwelling values have risen by 47.9%, but Melbourne’s values have only increased by 19.8%.
In contrast, Perth has seen a dramatic 76.4% rise in property values, while Brisbane’s values have surged by 71.5%. This slower pace of growth in Melbourne is a key reason why its median dwelling value has fallen behind cities like Sydney, Brisbane, and Adelaide, which have experienced strong value increases.
Supply and Demand
Melbourne’s property market has been affected by an oversupply of new dwellings. Victoria has seen more dwelling completions than any other state over the past decade, which has led to a glut in the housing market.
This oversupply has put downward pressure on property values, as more properties become available, reducing the competition among buyers. On the other hand, cities with tighter supply constraints, such as Brisbane and Perth, have experienced sharper increases in property values due to higher demand and fewer available properties.
Changing Housing Composition
The composition of Melbourne’s housing stock is another factor contributing to its lower median dwelling value. As of August, approximately 33% of Melbourne’s housing is multi-unit dwellings, such as apartments and townhouses, compared to 25% in Brisbane and just 16% in Perth and Adelaide.
Multi-unit properties generally have lower values compared to detached houses. This higher proportion of multi-unit dwellings in Melbourne has weighed down the city’s median dwelling value, especially when compared to cities with a higher concentration of low-density housing. The huge development that has gone on is only going to keep pressure on prices with so much focus on larger apartment buildings.
Melbourne buyer’s agents understand that increasing density actually drives up land prices, but unit values might actually stagnate as a result. This is something you need to be careful of as an investor.
There are still opportunities as a Melbourne buyers agent will attest to. But you really need to be focused on quality. With the abundance of apartments, values overall will lag. But the top-end and blue-chip properties will continuously outperform. In fact, given the lag here, the difference is only going to increase.
A professional Melbourne buyers agency or a Melbourne buyers agent can provide tailored advice and assistance, making the process less daunting.
