Melbourne has experienced a significant shift in the real estate market, transitioning from the second most expensive capital to buy a home in Australia to the fifth – a change in ranking that has opened up new opportunities for first-home buyers and existing homeowners in the city, PropTrack reported.
Despite the overall growth in home prices across most Australian capitals, Melbourne stands out as the only capital with declining home values over the past year.
According to Megan Lieu (pictured above), an economic analyst at REA Group, cities like Perth, Adelaide, and Brisbane have seen home values increase by 18.7%, 14.6%, and 12.6% respectively, driven by strong demand.
In contrast, Melbourne’s real estate market has not kept pace, contributing to its new ranking.
From the beginning of 2024, changes in land tax regulations and an increase in the absentee owner surcharge rate to 4% have particularly affected investors in Victoria.
These adjustments have led to increased costs for holding properties, prompting a shift in investment strategies, with many opting to offload their properties.
Consequently, the market has seen a 9.6% rise in home listings since November 2023, easing competition for available homes.
Victoria’s aggressive approach to home construction has also influenced Melbourne’s housing market, PropTrack’s Lieu said.
Since late 2018, the state has led in new home constructions, particularly in metropolitan areas, effectively managing to keep pace with population growth.
This surge in new housing stock has been pivotal in moderating home prices in Melbourne compared to other large states like New South Wales, Queensland, and Western Australia.
The current trends indicate that Melbourne’s housing market may continue to offer relative affordability if the pace of new home construction remains steady and if smaller cities continue to attract more demand.
However, this affordability could be temporary if there is a slowdown in construction or a shift in demand back towards Melbourne. Such changes could potentially reverse the current trend, leading to increased home prices, PropTrack reported.
These dynamics offer a promising landscape for those looking to purchase their first home or invest in Melbourne, with current market conditions favoring buyers over the short to medium term.
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