Melbourne property prices are in decline. Since we believe Melbourne often mirrors Sydney property prices, albeit with a lag, we expect this decline to continue. Over the last year Melbourne property prices have declined over 10%, according to Corelogic.
Since peak Melbourne property prices have declined over 11%. This is approaching our prediction of declines in vicinity of 15% over a year ago, the latest update can be found here.
We will look into our analysis of separate Melbourne property markets next.
Inner Melbourne property market
Inner Melbourne property market is a tale of two markets. For units, we are seeing significant downward pressure. We are not expecting any upside pressure in near-term future. While Australian view of high density living is slowly shifting, we expect this to take time. Even Sydney is still long way from accepting high rises as a norm.
On the other hand, houses and terraces. We are seeing a correction and we are expecting further declines in near term. However, we expect this decline to be short lived. Melbourne is an attractive city that is expected to overtake Sydney as the largest city in Australia. Moreover, land is in short supply which leads us to expect support for detached and semidetached housing.
North Melbourne property market
North Melbourne had a significant run up lately. We think North Melbourne has positive prospects in medium term. There is a significant increase in population in southern capital. We think this should translate to an increasing demand for properties in the north, especially established areas like Mickleham and Craigieburn.
Similarly to Sydney, we are seeing that properties with better finishes and owner occupier appeal are receiving support in this downturn. We believe this is due to continuing demand from owner occupier market.
South Eastern Melbourne property market
This is a burgeoning and booming market. We are seeing significant competition in the area and the blocks are being developed as quickly after purchase. This area remains desirable to property investors and owner occupier segments.
We are cautioning against overcapitalisation in this market. There are cases where older properties are purchased for knock down and rebuild. However, in a declining market it is very difficult to turn a profit on such ventures.