Melbourne’s long property slowdown may be nearing an end, with new analysis suggesting pent-up demand and improved affordability could drive a fresh wave of buyers.
Melbourne’s long property slump has turned into one of Australia’s best-value markets with prices now the cheapest of any capital city after a dramatic five-year market flip.
Fresh analysis from property advisory firm Oliver Hume suggests the reset could trigger stronger activity in Melbourne’s housing market, with transaction volumes forecast to rise about 20 per cent over the next year as investors chase value.
Oliver Hume chief economist Matt Bell said the downturn had pushed Melbourne’s housing market to 15-year lows for transaction volumes before early signs of recovery began to emerge.
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“Melbourne’s been in the doldrums for two or three years now, sitting at 15-year lows in terms of transaction volumes, but demand and pricing are improving,” Mr Bell said.
“We’re confident the fundamentals underlying Melbourne are strong, with elevated pent-up demand.
“Melbourne is relatively as affordable as it’s been compared with other markets across the country, both for land and established housing, for decades.”
Oliver Hume chief executive Julian Coppini says Melbourne has shifted from one of Australia’s most expensive housing markets to one of the cheapest over five years.
Oliver Hume chief executive Julian Coppini said Melbourne’s standing in the national housing market had changed dramatically in recent years.
“Five years ago Melbourne was the most expensive, or second most expensive city in Australia,” Mr Coppini said.
“Now it’s the cheapest.”
The reversal has begun attracting attention from buyers and investors who had previously focused on stronger-performing markets interstate.
PIPA chair and buyers agent Cate Bakos said Melbourne’s relative affordability was now drawing much stronger interest from outside Victoria.
“There’s no doubt Melbourne currently represents strong value in the national property landscape,” Ms Bakos said.
“In fact, over the past year I’ve received more interstate enquiries than I had in several years prior.”
Ms Bakos said investors were especially focused on detached houses rather than apartments, particularly in the lower and middle parts of the market.
Melbourne’s relative affordability compared with other capital cities is drawing renewed interest from buyers and investors after several years of slower market activity.
“Investors are overwhelmingly targeting houses rather than units,” she said.
“The majority of enquiry is focused on houses in the lower and middle quartiles of the market.”
She said Melbourne was also not moving as one market, with some sectors recovering faster than others.
“I do believe we are starting to see the early stages of the next property cycle,” Ms Bakos said.
“But Melbourne currently has quite a segmented market.”
REIA president Jacob Caine says Victoria’s regulatory and tax settings have weighed on investor sentiment, although interstate buyers are increasingly seeing value opportunities.
REIA president Jacob Caine said Victoria’s policy settings had also shaped how investors viewed the state.
“The regulatory and taxation environment in Victoria has made property investment less attractive than it has historically been,” Mr Caine said.
He said interstate investors were increasingly seeing value in Melbourne after several years of weaker price growth, even as many local investors remained more cautious.
“Interstate investors are increasingly viewing Victoria as a value opportunity,” he said.
Melbourne property transactions could rise about 20 per cent in the next year as pent-up demand returns to the market, according to new Oliver Hume analysis.
“However many Victorian investors feel they have carried the burden of the regulatory and taxation changes introduced over the past five years.”
Mr Caine said Melbourne still retained the fundamentals that continued to support long-term buyer demand.
“Melbourne still offers strong amenity, liveability, transport infrastructure and rental demand,” he said.
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