Melbourne continues to record some of the weakest conditions in the Australian property market, especially in the high-priced segment
The tightening of lending criteria is still hitting Melbourne hard, and the city, like Sydney, is facing monthly drops in property prices.
CoreLogic’s Hedonic Home Value Index for February 2019 reports that Melbourne’s values have fallen by a minimum of 1% every month since November 2018. Moreover, the rate of decline increased over the January 2019 quarter, with prices falling by 4% overall. As a result, Melbourne prices have regressed to the levels last seen two years ago.
The downturn has been particularly evident at the upper end of the market, as properties in the top quartile saw values plummet by 12.4% in the year to January 2019.
“The tightening of banks’ lending standards and stricter credit controls are making it more difficult for borrowers to access the same level of funding as was once possible,” says Geof Snell, principal property economist at BIS Oxford Economics. These factors are expected to cut down buying activity all the more as 2019 rolls on.
Growing population breeds demand for rentals
Even with Melbourne’s very low rental yields – among the lowest in the country – demand continues to power the rental market in this city due to recent population growth from both overseas and interstate migration. As a result, competition remains heated. It’s likely rental returns may improve as sales go down.
Infrastructure projects underway in the Melbourne metro could help sustain interest by creating jobs, which in turn could boost the population further. These projects include road and rail works, which should improve accessibility.
In addition, Herron Todd White’s February 2019 Month in Review has a rosy view of what’s in store for pockets of Melbourne. For instance, Port Melbourne and South Yarra are expected to steady slightly in the second half of 2019. However, a decline is anticipated in the inner-city unit market with the completion of new, off-the-plan apartments, which could put supply above demand.
In the meantime, buyers should expect the market to stay low for a while as the credit environment remains tightly held.
“I believe that Melbourne and Sydney are being strongly affected by this environment, especially since they often have very active investor segments. Price growth may not return until finance is more readily attainable,” says Century 21 chairman and owner Charles Tarbey.
SUBURB TO WATCH
CLARINDA: Downslide in Melbourne city suburb
Melbourne’s downturn continues to affect its surrounding areas. The housing market in the suburb of Clarinda, for example, has suffered a drop in values for the first time since 2014.
Situated just 19km southeast of the Melbourne CBD, this multicultural suburb boasts residents from India, Greece and Southeast Asia. Over the years, dwelling values have shown strong growth. However, the recent shift in property market fortunes resulted in a decline over the 12 months to January 2019, when house prices fell by 9.6% and unit values by 5.6%.
Nonetheless, rental rates for apartments increased by 5% to an average of $420 per week as of November 2018.
Culture: Clarinda is a melting pot of different cultures from Asia and the Mediterranean
Housing market: Clarinda reported a drop in property prices for the first time in five years