- The median price for a house in Melbourne's metro area is $934,000.
- Melbourne's dwelling approvals were 15% below the decade average in September.
- Experts gave their forecasts for Melbourne's property market in 2024.
Melbourne’s property market throughout 2023, like the rest of the country’s, has been hit with the mounting pressures of successive rising interest rates – which has exacerbated sellers’ hesitancy – and a burgeoning housing undersupply.
Moreover, total dwelling approvals in Victoria fell in September by 8.9%, according to the Australian Bureau of Statistics (ABS).
CoreLogic director, Tim Lawless, told The Property Tribune that dwelling approvals were 15% below the decade average in September, with all sectors of residential approvals trending at below average levels.
Melbourne’s property values also saw a slight increase over quarter 3, with the Real Estate Institute of Victoria (REIV) noting Melbourne house prices in the metro area had a median of $934,000 and Melbourne unit prices (median) were $634,000.
Melbourne’s rental market has also been a tough place to be, having been plagued by affordability issues with over 30% of renters experiencing rental stress.
Median sale price – quarterly
With 2023 winding down and 2024 just around the corner, The Property Tribune reached out to a few experts for their forecasts and predictions on the state of Melbourne’s real estate market next year.
Will affordability issues turn renters into mortgage holders?
Buckingham and Company director, Stuart Buckingham, said with exorbitant rental payments being demanded of tenants, they are being pushed into becoming mortgage holders.
“There’s been a lot of enquiries at the banks about getting loans,” he said.
“Renters are thinking, ‘I’m paying $500 a week for rent, I better put that towards a mortgage.'”
Stuart Buckingham, Buckingham and Company
Buckingham attributes the huge Melbourne rental prices to landlords passing the burden of rising interest rates off to their tenants, and population growth further straining the rental market.
Melbourne’s weekly rent
“A lot of those first homebuyers are coming back to the market. There’s going to be a big demand across the market.
Regardless of further rate rises, Buckingham predicts there will be further issues pertaining to a seemingly intractable supply and demand imbalance.
Melbourne’s advantage over Sydney
Lawless said that Melbourne’s property market has a growing affordability advantage over Sydney.
“Historically, Sydney has shown a 26% premium over Melbourne housing values, however, with Sydney recording consistently stronger growth conditions relative to Melbourne through the pandemic, that premium has risen to 44%, approaching multi-decade highs.
“This affordability advantage could incentivise interstate migrants looking for more affordable housing options.”
Tim Lawless, CoreLogic
Lawless also noted that with affordability barriers less severe relative to Sydney, local demand for Melbourne housing could prove more sustainable in the face of high interest rates and low sentiment.
According to Juwai IQI co-founder and group managing director, Daniel Ho, Chinese buyers are among the most significant in Melbourne’s market.
“One third of active Chinese buyers are looking at Victoria, which is a few percentage points more than New South Wales and more than another other state, according to Juwai IQI enquiry data,” he said.
“Policy changes in either Beijing or Canberra would have a big impact on what happens in 2024.
“Absent such changes, we expect Chinese buying to continue to increase in Australia, although at a slower pace in the third quarter.”
Rental pain not abating anytime soon
MRE director of business growth, Steve Fitzsimon, laid down a fairly grim outlook for Melbourne renters in 2024.
“For rentals, the only way is up,” he said.
“The State Government is making an investment property less attractive, yet the federal government has opened the doors to immigration.”
Steve Fitzsimon, MRE
Fitzsimon added that with prodigious building costs, projects have not been able to stack up yet and little is under construction.
“Huge demand and low supply equals rental pain for many years to come.”
An opportune time for buyers to enter the market
MRE residential sales manager, Michael Fava, said it was a challenge to forecast any drastic Melbourne real estate market shifts in the first couple of quarters of 2024, given the healthy levels of enquiries and attendance at Melbourne property inspections.
However, Fava noted an emerging trend where properties valued at $700,000 or below are experiencing heightened interest, especially from first time buyers.
“This demand is anticipated to persist into the coming year,” he said.
“The recent increases in interest rates have triggered a reconsideration among investors regarding their strategic preferences in the realm of property portfolios.”
Michael Fava, MRE
“Consequently, this revaluation has created a surplus of opportunities for prospective buyers seeking to enter the market.”
LJ Hooker head of research, Matthew Tiller, agreed that renters will be seeking more affordable price points in the market, however, not to the point that it will greatly affect vacancy rates.
“We still have strong population growth, there’s still people coming and there’s a lot of rental demand – some of that will be alleviated by those that have the borrowing capacity to purchase.
“But still, vacancy rates are going to be quite tight.”
Matthew Tiller, LJ Hooker
Tiller added that with his prediction of listings increasing throughout the year – in fact, surpassing demand – Melbourne property price growth will consequently moderate over that period of time.
On the other hand, Lawless said vacancy rates are likely to rise in 2024 as overseas migration eases and household formation normalises towards larger household sizes.
“It’s hard to see rental growth maintaining the current speed given worsening affordability constraints and the potential for an easing in rental demand,” he said.
