Victoria’s housing squeeze deepens as experts warn migration pressure, planning delays and entry-level shifts are fuelling a growing affordability crisis.
Melbourne’s affordable housing market is facing “extinction” as record migration levels add a $35,000 “penalty” to the cost of entry-level homes.
Research firm FoundIt has warned the squeeze of first-home buyers competing with new arrivals is now hitting Melbourne’s north and west hardest, including Broadmeadows, Campbellfield, Coolaroo, Meadow Heights, Melton and St Albans.
FoundIt’s analysis shows Australia’s broader migration trend has been running at roughly 800,000 to 900,000 people a year on its demand measure, while dwelling completions have hovered closer to 525,000 to 535,000.
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Australian Bureau of Statistics data shows more than 500,000 people arrived in a single year after borders reopened, while new home building remains well below the 2018 peak of more than 220,000 dwellings.
FoundIt argues demand and supply is tightening fastest at the bottom end of Melbourne house prices, at and below $750,000.
FoundIt research head Kent Lardner said the housing debate had become dangerously one-sided.
“My concern is that those in power have ignored demand,” Mr Lardner said.
New data reveals the widening housing bottleneck as population growth outpaces supply across Victoria. Picture: Gemini.
FoundIt research head Kent Lardner warns planning gridlock and construction costs are compounding the state’s housing shortfall.
“Since Covid, there has only been one issue talked about regarding house prices, which is supply.
“In reality, anyone who has done high school economics knows it’s supply and demand.”
The researcher said the mismatch between migration and construction was tightening fastest at the bottom end of the market because that is where new demand competes most directly with first-home buyers.
“The first impact is on rents,” he said.
“Most people who arrive in any country don’t immediately buy property.
“We have seen rental prices tip past 30 per cent of people’s household income, which is severely unaffordable.”
Mortgage Choice Greenvale broker Rebecca Stella says affordability pressure is forcing buyers to rethink what “entry level” now means.
Mortgage Choice Greenvale broker Rebecca Stella said the repricing was immediate and unforgiving for local buyers trying to save while renting.
“The impact is brutal in dollar terms. If prices rise 5 per cent on a $700,000 property, that’s $35,000,” Ms Stella said.
“Most people can’t save $35,000 in a year while paying rent and dealing with rising living costs.”
She said these are working-class and middle-income markets where even small percentage increases permanently reset what “entry level” means and remove the first rung of the property ladder.
New estates on Melbourne’s fringe remain in high demand as buyers chase relative affordability. Picture: Jake Nowakowski
PropTrack’s January market trends show how quickly some of those suburbs have moved.
Coolaroo has risen 19 per cent over the past year to around $627,000 while Broadmeadows is sitting near $659,000.
Melton, long viewed as Melbourne’s final affordable house market, is now around $548,000 after double-digit growth.
Ms Stella said many buyers in the $600,000 to $750,000 bracket were already borrowing at their ceiling, meaning another year of growth could wipe out deposit progress entirely.
“For many first-home buyers, that is the difference between entering the market and missing out,” she said.
The entry-level market has shifted sharply higher, with buyers stretching budgets as supply tightens. Picture: Gemini.
“This isn’t about blaming migrants, it’s about the numbers.
“If migration is running hot but housing supply and infrastructure aren’t keeping pace, you create a bottleneck.”
Mr Lardner added that rising rents were also delaying deposit formation and pushing buyers further out geographically.
“The second major impact is that the under $750,000 market has become all but extinct,” he said.
“That’s exacerbating the wealth gap … we need a viable first rung of the ladder.”
FoundIt’s modelling suggests that returning to pre-Covid era population growth would ease house price pressures by 2 to 3 per cent a year.
M R Advoacy director Madeleine Roberts says competition at the lower end is fierce as investors and first-home buyers clash.
M R Advocacy director Madeleine Roberts said Melbourne’s headline “flat” result masked intense competition in precisely those price bands.
“When you average it across the whole city it can look flat, but that doesn’t reflect what’s actually happening on the ground,” Ms Roberts said.
She said buyers who once expected a detached home under $700,000 in Melbourne’s northwest were now shifting expectations toward townhouses, smaller blocks or pushing further out.
“When you’ve got more people chasing the same number of homes, it’s always the entry level that gets squeezed first,” she said.
“You can’t keep telling people to just ‘look further out’ forever.
“At some point, the bottom rung disappears.”
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