This year will see less activity in the Melbourne market compared to 2013. However, property will be dearer this time next year at a predicted average of 4 to 6 per cent. 

In 2014 Melbourne is expected to experience steady but solid results, competitive bidding at auctions and clearance rates at over 70 per cent.

WBP's property analysts expect to see steady growth and solid results in the second half of 2014, however, activity in the market will not be as aggressive as the first half of the year.

WBP has examined the Melbourne Market on a micro level, recognising that different sub-sectors of a market can perform quite differently. The table below shows WBP’s growth predictions for various segments of the Melbourne residential market.

Melbourne Property Type                                                           2014 Forecast %       
Modern units/apartments * 0 to +3
Established units/apartments  +4 to +6
Prestige market ($5 million +)  0 to +3
Prstige market ($2-5 milion)  0 to +5
Established houses within 10km from CBD (under $2 million) +4 to +6
Established houses 11km to 20km from CBD (under $2 million)  +4 to +6
Holiday market  0 to +3
Mortgage belt (up to $500K)  +1 to +3
Development sites no change

*WBP forecasts do not include analysis of off-the-plan properties. Such resutls are artificial and we only include legitimate resales.

Where to buy in 2014
Using the REIV's September Melbourne median house price of $551,000 as a rough budgetary guide, here are WBP's top tips for the city's best performing properties.

In Melbourne's north, suburbs such as Coburg and Pasco Vale offer a good supply of well-located 1930s and 40s houses for between $550,000 and $700,000. The area is becoming increasingly popular with a new generation of young professionals, which is leading rejuvenation of the area. Located less than 15kms from the Melbourne CBD both suburbs offer rail services and are good options for those seeking a house within only minutes of the city.

Melbourne's highly desired and subsequently less affordable eastern suburbs offer limited opportunities to purchase a house at the half-million dollar range. Historically, this region of the Melbourne market has been the city's best performer with values rising strongly in the last decade. Buyer's thinking of purchasing in this area of the city may wish to consider a two-bedroom flat in well-regarded inner-eastern suburbs Balwyn and East Camberwell. Over the years these suburbs have performed strongly with current median unit values of $555,000 and $631,000 respectively.

Similarly, the south-east offers comparatively lower affordability than many other areas of Melbourne, leading many buyers in the region to opt for the smaller and more affordable alternatives of units, flats and apartments. The south-east corridor offers sound opportunity to obtain low-density quality 1950s-70s two-bedroom flats in suburbs such as Toorak, South-Yarra and Armadale from $520,000. Among the city's best-serviced suburbs these areas offer strong transport infrastructure and good access to the CBD, and have a historical trend of strong capital growth with unit values more than doubling in the last decade.

A little further south, Melbourne's highly sought-after Bayside offers buyers the chance to purchase well-maintained 2-bedroom 1970s villa units in beachside suburbs such as Brighton from $600,000. For buyers seeking a slightly more affordable option, suburb Mentone provides opportunity to obtain two-bedroom 1970s villa units close to shopping facilities and well-established transport infrastructure for as little as $450,000.

While Melbourne's west has traditionally offered greater affordability than other areas of the city, the disparity between values has reduced significantly in recent years. However, despite increased prices there remains opportunity to purchase small well-maintained two-bedroom houses for just over half a million dollars and only 10kms from the city in suburbs such as Yarraville. Alternately, there is also potential to purchase unrenovated townhouses or villa units in revitalised neighbouring suburbs Spotswood and Newport from $450,000.

Victorian Holiday Market
Victoria's holiday market, especially in the Mornington Peninsula, is expected to experience medium to strong growth.

The market will continue to be buoyant in 2014 with signs of positive shifts for property values in many regions, however, property selection is far more complex today than in the past so buyers need to purchase with caution. Not all property has good growth potential. To make a sound investment decision, buyers need to be acutely aware of the capital growth drivers and individual factors that influence property performance. Property is no longer an investment vehicle for uneducated buyers

Would you like to learn more about wise property selection in 2014? Read Greville's Buying Tips for Investors.