The Melbourne property market experienced the most significant quarterly decline in ten years. By the end of 2018, the Melbourne real estate market dropped by -4.7%.
The NAB residential property index highlights that property investors are losing interest in the city and as a result of this and the decline in Sydney’s housing market, Australian house prices have dropped by -2.7% in the last year.
Considering the overall state of the property market in 2018, how will 2019 fare? What is the overall market outlook for Melbourne in 2019?
What Happened in 2018?
After five years of steady growth, Melbourne’s property market experienced a sharp decline. Here are some of the possible reasons why the figures dropped:
- Credit restrictions particularly for property investor loans
- Reduced foreign investment
- More properties, fewer buyers
- Clearance rate reduction
- Oversupply of apartment units
Despite the overall decline in the Melbourne housing market in 2018, some outer suburbs held their prices (+6.2%) In comparison, Melbourne’s inner and middle ring suburbs experienced some price reductions with middle ring suburbs declining -5.7% and inner suburbs -24%.
Melbourne Housing Market Forecast 2019
Property experts predict that by June 2019, the median house price in Melbourne will drop to $820,000, approximately 8.4% less than the recorded median for December 2017. Units are also set to experience a decline, with a predicted 3% drop expected.
By June 2021 the median unit price is forecast to be at $545,000, which works out 2% less than the recorded median in June 2018.
SQM Research suggests that one of the factors affecting the property market is the reduction in interstate migration in the past two years.
Migration to Victoria has reduced by 4,000 since 2017. Other factors include bank finance restrictions and weakening foreign investment.
Expected Price Changes in 2019
Some property experts have predicted price drops of -9% to -6% in 2019. Here are some of the factors that might affect property prices in 2019.
-9% decline to -6% decline if the cash rate stays the same, slow economy and Labor government elected.
-11% decline to -6% decline if interest rates rise by 0.20 % and Labor government
-3% decline to 0% decline if 0.50% interest rate reduction and Labor government.
If a Labour government is elected, their planned negative gearing repeal policy could have a significant impact on the property market.
BIS Oxford Economics predicts median unit prices to drop -3.6% by 2020.
Top Melbourne Suburbs to Invest in 2019
It is certainly not all doom and gloom for the property market in Melbourne. These are just some of the top suburbs to carefully consider investing in 2019.
- North Melbourne
Growth is more likely on the outskirts of the city, for example, Werribee is up 17.86%, and Officer was up 30.55% in the past year.
Infrastructure development and expensive housing in the city center is luring first time buyers to Melbourne’s outer belts.
Lending restrictions, reduced population growth and weakening foreign investment are all factors affecting the Melbourne property market currently.
However, although further decline is expected in 2019, there is still hope for first time buyers and potential investors in the outer Melbourne suburbs.
Property analysts and major banks have recently modified their predictions for market growth in Melbourne, advising property buyers to tread with caution in 2019.