Feature Pic 170213Melbourne real estate is considered among the most desirable in the country, and the world.

It’s this very desirability that is responsible for the fast and steep rise in property values experienced in Melbourne during recent years.

In particular, consistently strong clearance rates of 72% to 80% in 2016, together with a 10% decline in stock levels compared with 2015 drove strong capital growth last year, particularly for houses, which saw an 11% increase in the Melbourne’s median house price to $760,000.

With demand expected to continue to outstrip the supply of established homes in Melbourne for the foreseeable future, the city’s strong growth trend is expected to continue in 2017.

The performers
The best performing property type in 2016 was freestanding houses under $1million in the inner and middle suburbs of Melbourne, closely followed by townhouses, villa units and house-sized apartments with courtyards.

These property types will be the go-to choice for many buyers again this year, with positive implications for growth performance.

Last year was a challenging year for investors, with APRA and major banks tightening regulatory and lending criteria.

Ongoing price growth resulted in record low investment yields in the range of 3.00% to 3.75% for investment-grade property, leading to a shift from investors to Melbourne’s inner north and western suburbs, in pursuit of better value and to meet budget constraints.

It is increasingly difficult to source a freestanding house under $1million within 15km of the Melbourne CBD, not to mention identifying and securing blue-chip assets, which see ever increasing demand and scarcity.

Some of the suburbs benefiting from the shift include Footscray / Footscray West, Newport, Spotswood, Coburg, Reservoir, Pascoe Vale South.

Key drivers
The key factors driving the performance of the Melbourne real estate market in 2017 include:

  • Affordability
  • Low unemployment
  • Population growth
  • Foreign investment
  • Low listings / supply

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Download the full Property Outlook: Melbourne 2017 here.

Like investors, homebuyers should invest in professional, independent and customised advice, if required, to assist with their home purchase.