Melbourne property market sees mom and dad builders flock to outer suburbs for the best bang for buck

• Families are building homes in suburbs between 20km and 50km from the Melbourne CBD, striking a balance between cost of buying a house and quality of life.
• The cost of building a house in these top 20 suburbs started at $272,944 and topped out at $387,688.
• Houses built ranged between a median size of 269 square metres to 398.5 square metres.

The Melbourne real estate market is among the toughest in the country to begin your property owning journey.

Not too far behind the financial exsanguination of Sydney’s market, the Melbourne housing market also fetches a pretty penny.

According to the latest SQM Research data, Sydney’s weekly asking property prices are over $1.9 million. Melbourne property prices are marginally more ‘affordable’, with Melbourne properties going for over $1.25 million a pop. Third behind these east coast megacities is Canberra, with weekly asking prices a tad under $1.2 million.

Melbourne property market weekly asking property prices

So begs the question: Will the hip pocket pain pass any time soon?

And, where are savvy Melburnians finding ways to get their foot on the property ladder more affordably?

Melbourne house prices tease at more growth

Australian property prices have risen almost 9% over the past 12 months, according to CoreLogic. The company’s Home Value Index (HVI) recorded an 8.9% rise across Australia, propping up Australian house prices by some $63,000; the national median home value is now $765,762.

“Despite three rate hikes, worsening affordability, and the rising cost of living, the increasingly entrenched undersupply in housing stock, and above average demand thanks to strong net migration, has helped push values higher,” said CoreLogic economist, Kaytlin Ezzy.

Proportion of Melbourne suburbs recording quarterly and annual rises in house and unit values

Source: CoreLogic.

“The quarterly growth rate has also reflected a tentative uptick in growth in more expensive markets like Sydney and Melbourne, which had previously shown some frailty after the November rate hike,” said Ezzy.

Melbourne’s top 20 homebuilding suburbs

New data reveals where both mom and dad builders, and professional developers, are putting their money.

Mostly spread across Melbourne’s outer ring, these suburbs are typically within a 40 minute to one hour commute from the Melbourne CBD – of course, that depends on traffic. Out of these top 20, 17 are between 20 kilometres to 50 kilometres from Melbourne’s CBD, while the remaining three are on the outskirts of Geelong.

Melbourne’s most popular suburbs to build a home

Source: OpenLot.

Commissioned by OpenLot, the research delved into two main metrics: annual building approvals and yearly increase in median building size. With an equal weighting to both, the suburbs were then ranked.

OpenLot’s founder, Qi Chen, said the research lifted the lid on which suburbs Melburnians believe strike a balance between the cost of buying a house and quality of life.

“Building a home in Victoria involves trade-offs – it costs too much for the average family if you build too close to the Melbourne or Geelong CBDs, while, for many families, you sacrifice liveability if you build too far away from the city centre,” said Qi.

“What we discovered through our research was that the ‘wisdom of the crowd’ has identified locations in the sweet spot of affordability and livability.”

Qi Chen, OpenLot

“Families on average incomes can realistically aspire to buy land and build quality homes in these suburbs, and because they’re in developed areas with plenty of amenity, they’re good places to live and raise children.”

Melbourne house prices: How much did it cost to build?

The research found that houses built in these areas ranged between a median size of 269 square metres to 398.5 square metres. The cost itself started at $272,944 and went all the way up to $387,688.

In a back of the napkin calculation, assuming the 269 square metre property costs $272,944, not accounting for other costs, means the build price is around $1,015 per square metre. Using the same assumption where the 398.5 square metre house costs $387,688, the house costs around $973 per square metre.

That’s of course not the most realistic figure, particularly given many sources put the average figure at around $2,000 per square metre for a three bedroom, single storey home, however, if employing newer methods of construction such as modular or prefab, costs may well be driven down to more affordable levels than going off-the-plan.

Price per square metre up as land sizes shrink

Domain data has found that the price per square metre across Australia’s capitals has risen substantially over the past few years; the report also revealed the trend of shrinking land sizes, attributed to densification.

Melbourne house prices by square metre, ranked from highest price per square metre to lowest

Source: Domain.

“Australia has some of the world’s least densely populated cities and is home to some of the most expensive property markets,” said Domain’s chief of research and economics, Dr Nicola Powell.

“Despite this, the desire of people to live in the capital cities has meant that more are trying to squeeze into them and are competing for housing.

“This housing demand needs to be countered with the growth of dwellings to slow the overall growth in home prices.

“The decline in land size is due to the increased urban density.

“While it might seem surprising, this shift is essential for preserving and improving housing affordability for the broader population.

“Without the shift towards greater density and smaller land sizes over the past two decades, house prices would be vastly higher than they are today – higher by 44% in Perth, 16% in Adelaide, and 14% in Melbourne.”

Melbourne land prices climb but now could be a great time to build

Qi said that a rare alignment of economic metrics meant that now was a good time to buy land and build a home for many families.

“Victorian land prices are increasing, but slowly, which means buyers don’t have to rush their due diligence,” said Qi.

“The growth in building costs has now moderated, after rising sharply during the pandemic.

“Unemployment remains low, so most people can qualify for a mortgage.

“Many economists are saying interest rates have peaked, which means consumers can have confidence that their borrowing costs are unlikely to increase in the foreseeable future.

“Of course, everyone has unique circumstances, so the current market won’t suit everyone. But, for many families, this could be the best time to be a buyer or builder for the foreseeable future.

Getting in before the property market explodes with growth again

The Reserve Bank of Australia (RBA) kept the official cash rate at 4.35% at its latest meeting on 19 March 2024.

Many experts forecast the cash rate will see its first cuts towards the end of this year, however, that may only herald in more Melbourne property price growth.

Regarding the interest rate decision this month, PropTrack senior economist, Eleanor Creagh, previously noted that:

“Despite a weaker outlook for the economy, the positive tailwinds for housing demand and a slowdown in the completion of new homes are likely to offset the impact of reduced affordability and a slowing economy. As a result, prices are expected to lift further in the months ahead, particularly while the expectation remains that interest rates will move lower in late 2024.”

The post-rate cut price growth will be notable, but not to the record-breaking levels observed over the past few years.

“I don’t think we’ll see record growth like we saw through Covid, but I still think we will see significant 10% plus growth through all the major cities and even regional cities because one thing that Covid has shown us is that we can work from home now,” Rethink Investing Senior Acquisitions Specialist (National), Robert Martin, previously told The Property Tribune.

An uptick in consumer confidence may also drive house prices up, with CoreLogic’s Tim Lawless previously noting that:

“Historically we have seen a close relationship between consumer sentiment and the volume of home sales.

“Following the 6.2% rise in the February consumer sentiment reading from Westpac and the Melbourne Institute, a further lift in confidence could be accompanied by a rise in home purchasing. This could add to housing demand that has already remained quite resilient despite the higher interest rate environment and cost of living pressures.”

Deep dive into Melbourne’s most popular suburbs to affordably build a new home

Truganina and Tarneit

Located a bit over 20 kilometres from the Melbourne CBD, the suburbs of Truganina and Tarneit have been very popular for new housing in Melbourne.

Weekly asking property prices for 3029, including Truganina and Tarneit

The suburbs have previously been ranked in Melbourne’s top three first home buyer hotspots, and is also among the most affordable – ranking in Melbourne’s top 10 suburbs to buy on an average salary.

Truganina was among the top performers for number of building approvals, at 755, with Tarneit seeing 1,455 homes approved.

The areas are serviced by Tarneit train station, and are broadly well-considered for its established communities and amenities. At least three major shopping centres are spread across the areas, alongside schools, and many large format retail centres too.

Truganina is also home to a major employment centre, home to distribution centres for Australia’s two leading supermarkets, and distribution centres for other major department and electronics stores.

Berwick and Officer

These affordable gems saw droves set up homes across these suburbs, and it makes sense why.

Berwick has repeatedly been ranked among the most affordable Melburnian suburbs around, and it even has good prospects for growth, according to some.

Indeed in winter last year, Berwick was the most popular in the nation, seeing nearly 42,000 potential home buyers eyeing down the Melburnian suburb.

Top 10 most in-demand suburbs for winter 2023 – houses

Source: PropTrack.

Berwick is leads the pack when it comes to suburbs primed for property price growth.
A report back in 2021 then put Berwick at the top with prospects of seeing a 14.5% year on year price growth.

Weekly asking property prices for 3806, including Berwick

Close to the employment centre of Dandenong South, and other amenities in the area, Berwick is also home to major hospitals, a university campus and several well-known and highly regarded primary and high schools.

Greenvale and Craigieburn

Greenvale itself has little to offer, at a glance, but its proximity to Melbourne’s Tullamarine Airport, Essendon Airport, and major employment centres in Cambellfield and Somerton make it attractive for some who work in the area and are looking for a slightly greener place to call home than neighbouring suburbs.

Craigieburn itself is a hive of activity, and to cap it off, it has its own golf course.

Large swathes of land in Craigieburn have been snapped in recent years by everyone from the commercial sector to retail, and more.

It also happens to be another Melburnian first home buyer hotspot, with a 2023 report ranking the suburb in the top three postcodes for Melbourne.

Sunbury

A hive of activity unto itself, the locale of Sunbury is some 40 kilometres out from the Melbourne CBD

Filled with amenities, from a selection of schools to retirement villages, and a large retail offering, it even has its own Christmas tree farm.

Quaint matters aside, living in the area remains fairly affordable, compared to the rest of the Melbourne housing market.

The latest SQM Research data shows weekly asking prices a hair under $700,000 a pop, with prices having floated around that mark since mid to late 2022.

Weekly asking property prices for 3429, including Sunbury

Sunbury has also been a top investment pick, appearing in the top 10 Melbourne suburbs to invest in, alongside being a developer pick for future homes.

It has also been renowned for its affordability, repeated appearing on best suburbs for first home buyers, and is among the best in the nation for buying on an average salary.

Werribee

Another hot favourite for affordable Melbourne suburbs to buy or build a home is Werribee.

Poised neatly between Geelong and Melbourne, the locale is some 32 kilometres from the Melbourne CBD.

It almost seems amenities galore, from your local shopping centres to something more substantial, schools, stadiums, racecourses, and on the other side of the M1, the an open range zoo.

Something a bit less wild are the prices, with houses typically coming in at under the $700,000 mark in recent times.

Weekly asking property prices for 3030, including Werribee

Werribee is also serviced by its own train station, affording locals a 40 minute trip too and from Melbourne via public transport. Driving appear to be roughly the same time.

7