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4 Interesting Facts and Figures About the Melbourne Property Market

August 7, 2021

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Melbourne is Australia's second-largest city in terms of population. It’s also the second most expensive capital city in the national property market. Its real estate has one of the highest long-term rates of capital gain. This has caused property prices to skyrocket, pricing many first home buyers out of the market and into the outer suburbs. But it’s not all doom and gloom. Our real estate agents within Listing Loop are on hand to help you navigate the fantastic inner and outer city suburbs full of character. Despite an increase in property values, the housing market continues to post positive results. But can the capital city of Victoria sustain its momentum moving forward? Let’s dive a little deeper into the Melbourne real estate market to find out more.

Why Buy Property in Melbourne?

Melbourne's skyline at dusk. In the last five years, a steady increase in house values and tenants occupancy have both been decisive reasons for investors to buy into the Melbourne housing market. As one of the most liveable cities in the world, Melbourne has attracted many people from across the globe, making it an attractive destination for new residents. Analysts laud the mass influx of national and international migrants as the main catalyst to Melbourne’s booming property market. Related: Buy off-market properties for sale in Melbourne

Melbourne Suburbs Where it’s Cheaper to Buy Than Rent

Recent Real Estate Institute of Victoria data suggests that if you know where to look, buying your first home in Melbourne can still be quite affordable – perhaps even more so than renting. A comparison of the western vs the eastern suburbs gives the best analysis of house prices in Melbourne. The city’s western suburbs are the most affordable. However, as you head towards the east and south-eastern suburbs, house prices tend to increase. According to PricewaterhouseCoopers (PWC), community safety is the most important factor in determining how much people love where they live.

Docklands

The Docklands is one of Melbourne's prime waterfront locations and buying a one-bedroom unit here is surprisingly affordable. According to data from REIV, it will cost you $442 a week in repayments for a mortgage on a $420,000 one-bedroom unit. If you were to rent a similar property, it would set you back at least $450. This is $8 more than mortgage repayments.

Carlton

This Melbourne suburb sits just north of the city’s most central point. Data from REIV further suggests that it will cost you $226 a week in repayments for a one-bedroom unit in the area. Rent for a similar property is $149 more expensive. This further proves that you don’t have to look to more quiet or removed areas for affordability. Shrewd investors can also consider such properties for their low maintenance costs and high rental yields. Related: Listing Loop partners with REIV

Melbourne CBD

Melbourne’s central business district offers a vibrant hub for dining, arts, live entertainment and towering office buildings. The Melbourne CBD also dominates in vacant apartments. A one-bedroom unit that sells for $328,000 will cost $345 a week in repayments. That is roughly $50 cheaper than renting a similar house.

Statistics & Facts of the Melbourne Property Market

Let’s take a look at the city of Melbourne in numbers.
​Latest figure (year) Past figure (year) ​Source
Estimated resident population (ERP) 183,756 (2020) 178,994 (2019) Australian Bureau of Statistics
Median age ​28 (2016) ​28 (2011) Australian Bureau of Statistics
Residential dwellings ​89,200 (2019) City of Melbourne
Total built space 35,100,000 m2 (2019) 33,900,000 m2 (2018) City of Melbourne
Number of establishments (business locations) 16,700 (2019) 16,800 (2018) City of Melbourne

Unit, House or Apartment

Apartments in Melbourne only contribute 7% of the housing stock, making it the most undersupplied city in the western world with regard to apartments and other forms of medium-density housing. Other cities of similar size around the world have between 30-40% of all their housing stock in the form of apartments. A unit that costs the same as a house of similar size will outperform the house in capital growth. Although you can’t subdivide or expand the size of a unit, they have lower maintenance costs, are cheaper to run and can be leased out. The approach many investors prefer involves buying when the prices are low and selling when the prices are high. For a first home buyer predisposed to risk, an opportunity to buy when prices are low will eventually present itself, like in today's market. Once you select the location that meets your criteria, there are some general rules to consider when buying a good property in the city.
When buying houses consider When buying apartments consider
Proximity to good schools The accessibility and daily functioning within a high rise apartment
Access to community amenities Basic essentials are within the reach
Public transportation that is within walking distance The age of the building
Proximity to the central business district The security measures within the property
Houses with good quality and with potential to add value The maintenance charges of the property

Property Values

In the last four decades, the Sydney and Melbourne property markets have been among the best and most consistent real estate markets in Australia. Over that period, Melbourne’s average house price has increased by 7.9% per year, while prices for units and apartments have increased by 7.73% per year on average.

House Prices

In recent years, house prices in some of Melbourne’s more affordable suburbs have soared by at least 47%. Suburbs such as Crib Point, Bittern and Capel Sound on the Mornington Peninsula, and leafy Romsey, are among those notching double-digit growth. Areas north and west of the CBD that had upgraded road and rail infrastructure and strong population growth were the strongest inexpensive unit markets. There was also a strong price growth in suburbs in scenic locations with access to parks and recreation amenities.

Auction Markets

Data from CoreLogic’s latest auction market review reveal that less than 4 out of 10 houses in Melbourne’s central business district were auctioned in the March quarter. This made the CBD a buyer’s market in comparison to the rest of the city. Across Melbourne, the average clearance rate increased by 77.5% - a 9% increase from the previous quarter. Here’s a breakdown of capital city auction clearance rates and volumes.
City Clearance Rate (%) Number of Auctions
Sydney 62.2 7,135
Melbourne 63.8 8,882
Brisbane 41.7 1,066
Adelaide 52.3 827
Perth 35.1 287
Tasmania 51.3 66
Canberra 65.1 639
Combined Capitals 62.5 18,902
Source: CoreLogic Quarterly Auction ReviewMarch quarter data

Melbourne Housing Market Forecasts

The Victoria economy has historically been Australia’s strongest state economy, creating more jobs than any other state. Unfortunately, 2020 and 2021 haven’t been the best of years worldwide - never mind Victoria. Melbourne has had a sluggish economy due to the most lockdowns of any other Australian state and its employment rate isn’t as good as it used to be. Despite the unfortunate setbacks caused by the Covid-19 pandemic, we expect the market demand to surge again in the future because:
  • Many first home buyers will be in the market en masse.
  • The strong foreign interest from tourists, migrants, and investors when life goes back to normal is expected to spur growth.
  • Melbourne is expected to see a lot more apartments and other forms of affordable and convenient housing due to population growth.
Agents understand the ins and outs of Melbourne’s real estate. They're at hand to help you find the perfect property regardless of what your needs or budget are. If you’re interested in owning your own little piece of Melbourne real estate by making the switch from renting to buying, check our Frequently Asked Questions to learn how you can get started.


Photo by Pxfuel / CC BY

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