Melbourne’s, once a stalwart of the national market, is experiencing a slowdown – particularly in comparison to the surging markets of other cities like Brisbane.
For the first time in 14 years, Brisbane’s median home value has overtaken Melbourne’s, hitting $951,000 compared to Melbourne’s $912,000. This shift raises important questions about the future of Melbourne’s property market and its potential for recovery.
In recent quarters, Brisbane’s house values grew by 4.4%, whereas Melbourne saw only a 0.1% increase. For units, Brisbane enjoyed a 7.4% growth, while Melbourne experienced a slight decline of 0.1%.
The Pandemic’s Lingering Impact
The COVID-19 pandemic hit Melbourne particularly hard, leading to significant interstate migration and a decline in rental demand. Prolonged lockdowns and border closures exacerbated these issues, causing many investors to leave the market.
As of June 2024, Melbourne’s property prices were still 3.89% below their pre-pandemic peak, while other cities had already surpassed their previous highs.
Market Sentiment and Sales
Victorian property owners remain cautious, with only 19% considering it a good time to sell, according to a recent Residential Audience Pulse survey by realestate.com.au. Despite this, Melbourne’s sales figures in June were up 16% compared to the previous year. However, over one-third of these properties sold for less than the asking price, reflecting a more conservative approach among buyers.
Factors Delaying Recovery
Several challenges are delaying Melbourne’s recovery:
1. High Interest Rates and Living Costs: These have reduced borrowing power, making buyers more hesitant.
2. Housing Supply Shortage: High development costs and a volatile construction industry have limited new housing projects, driving up prices.
3. Economic Uncertainty: The broader economic environment, including inflation and job stability, plays a crucial role in buyer confidence.
Long-Term Strengths
Despite current challenges, Melbourne retains several strengths that support its longterm recovery:
1. Liveability: Melbourne’s high quality of life, cultural vibrancy, and excellent amenities continue to attract residents, ensuring ongoing demand for housing.
2. Education and Healthcare: The city’s leading educational institutions and medical facilities attract students and professionals, creating sustained demand for various types of housing.
3. Cultural Appeal: Melbourne’s rich cultural scene, including its food, arts, and sports, enhances its desirability as a place to live, supporting a dynamic property market.
4. Economic Diversity: A strong and diverse economy, encompassing sectors like finance, technology, education, and healthcare, provides a robust job market that attracts workers and their families.
Predicting the Bounce Back
Given the current conditions and necessary interventions, Melbourne’s property market recovery is expected to be gradual.
Experts suggest that significant recovery may not be seen until there is a reduction in interest rates, which could potentially happen by mid-2025 if inflation is brought under control. This, coupled with strategic government policies and economic stability, could set the stage for a rebound.
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