Melbourne’s housing market is poised to outshine other capitals in the next housing upturn, driven by improving affordability and rising rental yields that are set to attract both investors and home buyers.
Shane Oliver, AMP's chief economist, emphasizes that while all markets will benefit from lower interest rates, Melbourne’s period of underperformance positions it for a particularly robust rebound.
Home values in inner Melbourne suburbs, such as Brunswick West, have already risen by 2.5% in the past three months, indicating early signs of recovery. "It may take several rate cuts to fire up Melbourne’s house prices, but when it occurs, it could come back with greater strength than what we’re likely to see in Brisbane, Adelaide, and possibly Perth," Oliver says.
Historically, as affordability improves in Melbourne relative to other capitals, the city experiences sharper recoveries, setting the stage for a strong resurgence.
Despite a modest decline in Melbourne home values recently, the downward pressure is minimal, reflecting a stabilizing market rather than a steep downturn. Melbourne’s significant affordability advantage—where home values are now 33.1% lower than Sydney’s and 8.8% cheaper than Brisbane’s—makes it an attractive proposition for investors.
According to Tim Lawless, CoreLogic’s research director, "With housing prices being more affordable and rental yields potentially rising, the prospects for long-term capital growth are enticing more investors."
Several Melbourne suburbs have already seen price rebounds, with areas like Middle Park, St Kilda, and Brunswick West recording increases of up to 3.3%. Similarly, unit prices in Box Hill South, Mont Albert, Box Hill, Burwood, and Blackburn North have climbed between 1.6% and 5.7%, after previous declines. This early momentum suggests a broader recovery is on the horizon.
Moreover, Melbourne's housing market benefits from the city's enduring appeal and infrastructure development. The city's extensive public transport network, vibrant cultural scene, and high-quality education institutions continue to attract residents and investors alike.
Additionally, ongoing state policies aimed at stimulating the housing market and improving affordability are expected to further bolster Melbourne's property market performance.
Melbourne's current market conditions, characterized by affordability, early signs of recovery, and strong long-term growth prospects, present a compelling case for property investment.
For property investment advice and how to capitalize on Melbourne’s investment opportunities, contact Oli. Our expertise can help navigate the market and identify the best strategies for achieving your property investment goals.
Source: The AFR
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