Melbourne property market is following Sydney market closely and the declines seem to accelerate. We believe it is a housing market that, although not always, but usually follows Sydney very closely.
The property price correction in Melbourne started around the middle of 2018. As we are preparing this article Melbourne is down 9.35% compared to previous year (numbers are from ). We also mentioned that Melbourne property market seems to accelerate its declines, it feels like Sydney property market 3-4 months ago.
Overall Melbourne property market view
As indicated in the chart above we are seeing that declines in house prices are accelerating. We expect a before the election as people rush to lock in any negative gearing provision (in anticipation possible change in the federal government). Therefore, if this bounce is to eventuate we wouldn’t place too much weight on it. Furthermore, if the bounce would happen it is likely there will be a sharper, albeit very temporary, drop afterwards.
Unlike , we are not seeing an increase in vacancy rates. This is expected as Melbourne is experiencing a much larger inflow of residents. Therefore, in longer term we believe that Melbourne shall have more support to its property prices.
State demand remains weak
Along with the vacancy rates, the final state demand in Victoria remains positive and much higher than NSW. Which tells us that the wealth effect of declining property prices in Melbourne is less pronounced than in Sydney. At least that is what we believe.
While we believe Melbourne declines are accelerating, we don’t think Melbourne would see declines that Sydney is experiencing. 2019 might prove challenging to unit, apartment and greenfield market in Melbourne property market. However, the significant demand for properties in Melbourne due to growing population, robust economy and better affordability would support the property market should prices start to decline. This means that our thesis did not change since early this year.