Since the start of 2022, people have wondered what the next few years will hold for the Melbourne real estate market. With prices already rising and construction costs surging, it’s safe to say that there will be some changes in store for the market.
Melbourne is a bustling city that’s been attracting an increasing number of residents over the years. And as the population continues to grow, so does the demand for affordable housing.
And we understand why—many Melbourne suburbs are safe while also offering affordability, accessibility, and quality of life. So, Let’s take a closer look at what the future holds for Melbourne’s growth and which suburbs are likely to see the most significant changes.
Expand Your Knowledge: Considering a new home in Victoria’s capital? Our guide on buying a house in Melbourne offers additional insights that’ll complement your current research.
The Downsides
Recommended Reading: The Most Undervalued Suburbs in Melbourne This Year
Rising Construction Costs
According to the Cordell Construction Cost Index, construction costs in Melbourne are surging at the fastest rate in twenty years. The index shows that construction costs in Melbourne increased 3.8% in September and 7.1% by the end of 2021.
This is the most significant construction cost increase since the Goods and Services Tax (GST) introduction in 2000.
The Rise and Fall of Dwelling Values
Westpac, one of Australia’s big four banks, currently suggests Melbourne’s dwelling values will rise by 8% in 2022. This is good news if you own a home in the city, and it’s good news for the economy. Rising dwelling values mean that people feel confident about their financial situation and are more likely to spend money on big-ticket items.
Melbourne’s housing market will likely experience a rollercoaster in the next few years. Australian and New Zealand Banking Group (ANZ) is forecasting that prices will fall by a negative 5% in 2022 before dropping a further negative 6% in 2023.
In 2022, the Commonwealth Bank of Australia (CBA) predicted an 8% decline, followed by a sharp drop of negative 10% in 2023. This obviously creates uncertainty for home buyers and sellers alike.
When values are on the way down, it could provide an opportunity to enter the market for renters and first-home buyers who were priced out of the market. However, a value decrease can be worrying for those who already own property.
If you’re considering selling, wait for values to rebound before putting your home on the market. If you’re not planning on moving any time soon, then there’s no need to panic because your home is still likely to be worth more than it was a few years ago.
If you’re planning on investing, check out our round up of the best suburbs to invest in Melbourne under $500k.
The Upsides
Less Red Tape
News of changes to Victoria’s planning system aims to speed up building approvals and reduce red tape. The new legislation will provide a faster assessment of major developments, reducing planning permit application timelines by six months.
Changes to house style rules will also make it easier and quicker for Victorians to create new homes. The reforms intend to make building a new home easier and faster so that more people can enjoy the benefits of homeownership.
In addition, the reforms should help create jobs in the construction industry and boost the state’s economy.
Suggested Reads: Predicted House Prices in 2030 Melbourne
Windfall Gain
Finding the most affordable places to live in Melbourne can be challenging, and a new tax may take steps to change that. The Victorian government is on the verge of approving the Windfall Gains Tax, which would impose a 50% levy on any extra value generated by rezoning a piece of land.
The legislation currently being considered by parliament would require the windfall gain to be paid either when the ground is sold or thirty years after the rezoning, whichever occurs first.
The tax will capture some of the value that developers and landowners are currently reaping and redirect it back into the community. While the tax is sure to be unpopular with those who stand to lose out, those who have long been calling for action to address Victoria’s housing affordability crisis welcome it.
If passed, the Windfall Gains Tax will be a significant step toward making housing more affordable for everyone in Victoria.
Summary
In general, the Melbourne property market is likely to have positive growth in the years to come. Whether you plan on renting or buying property at an auction in Melbourne, the market will always be hungry for real estate.
With less red tape in the building and development industry and the implementation of a new Windfall Gains Tax, it will be easier for people to buy or develop a property, leading to an increase in value for a variety of interests.
