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Househunters are being crushed in an $800,000 to $1.2m battleground as a “critical” shortage of homes ignites a bidding war across Melbourne’s family heartland.
New investment data from Convergence Buyer’s Agents shows Melbourne’s property market is splitting in two, with fierce competition across middle-ring and outer suburbs as stock levels plunge and buyers pile into tightly held areas.
The report identifies ten suburbs — Sandhurst, Chelsea Heights, Greenvale, Langwarrin, Taylors Lakes, Doreen, Seaford, Boronia, Cranbourne North and Frankston — as key hotspots where demand is surging amid limited supply.
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Convergence Buyer’s Agents director Sky Hammer said the issue was no longer demand, but the system’s ability to deliver enough homes where people actually wanted to live.
“In some of these suburbs there’s less than 0.5 per cent of stock on the market, so when homes come up, there are huge numbers of buyers competing,” Mr Hammer said.
“It’s not demand that’s the issue anymore, it’s the system’s ability to actually deliver homes.”
Convergence Buyers Agents director agent Sky Hammer says buyers priced out of higher budgets are being pushed into Melbourne’s most competitive sub-$1m segment.
Mr Hammer said rising construction costs, planning delays and feasibility challenges were all working against new supply.
“When you combine planning delays with construction costs, it’s very hard to bring new supply to market right now,” he said.
“It’s not that people don’t want to buy. It’s that in a lot of the suburbs they want, there’s just not enough available.”
Ni Advocacy director and buyer’s agent Kevin Ni said the conditions were creating a clear “two-tier” market, with buyers gravitating towards more affordable price points.
“The market in Melbourne is very fragmented,” Mr Ni said.
Ni Advocacy director and buyer’s agent Kevin Ni says lending trends show a clear shift, with borrowers clustering in more affordable brackets as rates bite.
“Properties above $1m are more affected because you’re borrowing more money, whereas homes in that $600,000 to $650,000 range are more accessible to a larger pool of buyers.
“If more people can afford that lower price point, naturally you get more demand.”
Mr Ni said the trend was also being driven by the types of suburbs attracting both owner-occupiers and investors.
“Suburbs like Boronia, Langwarrin and Chelsea Heights all have that owner-occupier appeal,” he said.
“That’s what you want, markets where first-home buyers and investors are both active.”
He added some areas were already undergoing demographic change.
Finance broker Damian Medici says demand in the $800k-$1m range remains strong as first-home buyers push to get a foothold in the market.
“The old demographic is dissolving and being replaced by higher-income buyers, that’s how gentrification happens,” Mr Ni said.
Finance broker Damian Medici said buyers were increasingly being funnelled into a narrower part of the market as borrowing limits reshaped demand.
“That $800,000 to $1m bracket is the entry point into the market now,” Mr Medici said.
“You’ve got first-home buyers, investors and even upgraders all competing in that space.
“There’s a lot of demand concentrated there, and that’s why it continues to perform.”
Rising interest rates are reshaping buyer behaviour across Melbourne, tightening budgets and intensifying competition at the entry level.
Mr Medici said while activity remained strong in that segment, the top end of the market was beginning to lose momentum.
“At the upper end, buyers are more cautious,” he said.
“When you’re talking about $3m-plus purchases, those decisions are far more considered.”
He said most buyers were still transacting based on what they could afford, but warned sentiment could shift quickly if rates rose further.
“People have adjusted to rates starting with a six, but if we start seeing sevens, that’s when things could change,” Mr Medici said.
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