Despite being the place in Australia most disrupted by COVID-19, the Melbourne property market has remained strong throughout the past 18 months. It has delivered price outcomes that are below par for the pandemic boom but remarkably good in the circumstances.
CoreLogic data found that Melbourne house prices overall have increased 18.0% in the year to 30 September 2021, including 1.1% in the month of September and 4.3% in the September quarter. Unit prices increased 8.3% in the year to 30 September 2021, including 0.2% in the month of September and 1.1% in the September quarter.
How you assess those numbers depends on perspective. Amid the restrictions on real estate during lockdowns, the numbers are remarkably good. In more normal times, they would be regarded as a highly positive outcome, data that depicts a boom, particularly for the housing market.
But compared to other cities and regional markets, the figures are below par. The annual growth for houses is the lowest among the capital cities. The 4.3% rise in the September quarter compares with 6.2% in Sydney, 6.5% in Brisbane and 7.5% in Canberra.
The 1.1% increase for units in the September quarter compares with 4.6% in Sydney and Canberra, 7.8% in Hobart and well above 4% in all the regional jurisdictions across Australia, including 8.0% in Regional Tasmania.
The 10 best suburbs in Melbourne to invest in
- Crib Point
- Heidelberg Heights
- Narre Warren
Melbourne experienced major increases in property values during the boom from 2013 to 2017 and has now experienced further big rises in the pandemic boom, albeit at levels lower than other capital cities.
There continues to be high demand for locations that offer relative affordability, including outer-ring suburbs in the $500,000s and $600,000s, and anywhere in middle Melbourne with a median house price below $1 million.
At a time when major price growth has become the norm across Australia, the Mornington Peninsula on the southern fringe of Melbourne has been one of the most prolific in the nation. Several of its suburbs have recorded median price growth above 25% in the past year, boosted by the area’s status as a major beneficiary of the ‘Exodus to Affordable Lifestyle’ trend.
Suburbs with the parameters for further growth include Crib Point, where residential rents are soaring, vacancies are sitting at zero and buyer demand continues to rise, with a consequent impact on prices. It remains relatively affordable (median price $620,000), despite the recent increase in values.
It’s a similar scenario in the suburb of Mornington, where rising prices on the back of increased sales activity are nudging the median price towards $1 million. Mornington is a hub for infrastructure, services and amenities, including schools, shops, sports facilities, green spaces and foreshore recreational areas overlooking Port Phillip.
Also on the southern outskirts of the metropolitan area, the City of Casey is being targeted by first-home buyers and others on a budget. The suburb of Cranbourne is a hub for services and infrastructure – and continues to attract big demand from both buyers and tenants. Growth in the median price to $550,000 in the latest quarter suggests the rate of price escalation is increasing.
Nearby Narre Warren is another high-volume location for buyers and renters and the rate of price growth is increasing here also. The median house price is sitting at $640,000. Narre Warren is well-served by infrastructure, including a major retail/commercial hub, sports amenities and green spaces, and easy access to the Monash Freeway, which is undergoing a major upgrade.
As Melbourne prices rise, the City of Knox has become a targeted middle-ring precinct with lots of green space and houses still below $1 million, including Knoxfield (median price $885,000) and Scoresby (median price $900,000). In both these suburbs, vacancies are very low with rents rising and buyer demand is increasing, causing the rate of price growth to accelerate in the latest quarter.
Another middle-market precinct enjoying growing popularity is the City of Banyule, which has a number of good suburbs in the middle price ranges, clustered around the La Trobe University campus. Heidelberg Heights (median price $865,000) is a standout, with good rental demand, rising sales activity and a pick-up in the rate of price growth in the latest quarter.
The nearby LGA of Manningham is another strong middle Melbourne market, where the suburb of Templestowe (median price $1,500,000) has elevated buyer demand, pushing up prices at a faster rate recently. It’s also an area of below-average vacancies, putting upward pressure on rentals. Templestowe is surrounded (almost) by major green spaces including parks, wetlands and golf courses, providing an enviable lifestyle less than 20km from the Melbourne CBD.
The Kingston LGA in the south east is also attracting more attention, with the suburb of Mordialloc popular for its infrastructure and amenities. Buyer demand is rising, causing the growth rate in the median house price to accelerate recently reaching $1,160,000.
The City of Monash is one of the best precincts in Melbourne for infrastructure and amenities, with future spending to provide further impetus to the local economy and property markets. The suburb of Ashwood (median price $1,365,000) is experiencing rising buyer demand and the rate of price growth has accelerated recently. A major green space corridor runs through Ashwood, which is also well situated for the array of medical and university facilities that make the City of Monash a compelling destination, including the $1 billion Victorian Heart Hospital which is now under construction.
The 10 best suburbs in Melbourne to invest in
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|Suburb||Median house price||1-yr growth||10-yr average
annual growth (%pa)
Sources: Median price, growth and rental yield: CoreLogic data sourced from yourinvestmentpropertymag.com.au dated 1 August 2021. Vacancy rates: SQM Research as at September 2021.
Cover image source: Gordon Bell/Shutterstock.com
About Terry Ryder
Terry is the founder and Managing Director of hotspotting.com.au, which he created in 2006 to help investors find the best places to buy. Terry has been a specialist researcher and writer on Australian residential property in a career spanning four decades. During that time he has published four books.
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