*Updated 27 March 2023
Melbourne has kept a steady pace in the past ten years as it grew as one of Australia’s top cities.
The local property market followed in stride, with the price increase of average residential dwellings in the area seeing a little over 90% growth since 2012.
Currently, the prices of houses for sale in Melbourne, Australia, are around $975,000. The median unit price is around $628,000. This is actually down 9.6% from Melbourne peak in February 2022.
How else did the Melbourne real estate market evolve in the past decade.
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Have House Prices in Melbourne Doubled in the Last Ten Years?
According to the Australian Bureau of Statistics (ABS), Victoria saw a 73.92% increase in house values over ten years, with an annual percent change of 5.86%. In Melbourne, the local property market grew at an average of 4.8% every year.
This would mean that house prices couldn’t have doubled in the last ten years as it would take around four years to reach 100% growth.
That said, some suburbs saw housing prices double in a ten-year period, with a couple even reaching triple growth. These are mostly postcodes in the Mornington Peninsula, as well as former new housing estate suburbs.
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Effects of the Growing Melbourne Property Market
The rising house prices in Melbourne have changed the profile of local home buyers because of the increase of interest rates and the lowered affordability of homes. There has also been a surge in construction costs simultaneously.
Higher Mortgage, Lower Affordability
As housing prices rose, the average mortgage loan size also followed suit at 6.4% per year. This is in contrast to the average fixed salary increase, which as recorded at only 1.5% in the 2nd quarter of 2021.
Because wages haven’t been able to keep up with the rise in property prices (housing prices have risen almost eleven times faster than wages in the past few years), homes have become less affordable, particularly for first home buyers.
Less First Time Home Buyers, More Investors
Because buying a home has become less affordable, there has been a decrease in first-time home buyers in the market. Their demographic comprises less than 20%. However, more investors have come to re-energise housing; they make up about 40% of total property buyers.
Surge in Construction Costs
Residential construction costs are about to outpace rises in property prices in Australia, barring more first home buyers from making the jump. The cost of building a house in Melbourne averages $350,000, with the cost of knocking down and rebuilding a house in Melbourne roughly the same.
The Melbourne Property Market Today
Melbourne’s property market was hit hard by the pandemic and many wondered, when will Australian house prices crash? But the market bounced back rapidly from the end of 2021.
In February 2022, Melbourne’s housing market hit its peak value, trailing slightly behind Sydney’s peak. However, this followed a remarkable 17.3% increase in property values since the start of the pandemic. As of then, Melbourne’s property values have decreased by 9.6%, but the rate of decline has slowed down in the past three months due to the rise in interest rates.
During the market boom, Melbourne’s housing market experienced a substantial surge in property values, particularly in houses, with an increase of nearly 21% over the growth cycle. This was in contrast to the unit market, which had a more modest gain of 10.5%.
However, some predict that Melbourne will bounce back soon. The city is expected to welcome more residents as borders open, leading to a rise in population, which could assure the local property market’s long-term capital growth.
Coupled with Victoria’s consistent high gross domestic product (GDP) returns, Melbourne is set to become one of Australia’s largest capital cities in the next few years.
The Melbourne Property Market in the Future
It’s hard to predict the future of the Melbourne housing market for the next ten years. Experts give mixed reviews, though there’s consensus that project prices will continue to fall because of higher interest rates.
Is It a Good Time to Buy Property in Melbourne Now?
As Melbourne’s property market slowly regains its shape, it’s a great time to get in on the action, especially while current lower prices have become more affordable to the average home buyer and trends projecting another boom in the coming years that could guarantee a return on your investments.
If you’re looking to buy a property in Melbourne today, scour through Soho’s search page to find the right property in the best suburb for you. For the full experience, you can also download the app so you can save and shortlist the houses you’d like to be your future home!
