With another year closing, we thought we’d take the opportunity to provide an update of what’s happening in Melbourne’s property market.
This time last year, the average lot price in Melbourne’s growth area land market was $211k and the volume of sales were at record highs. What was suggested at the time is that there was still room for further price growth, but for volumes to begin moderating at some point.
Well the strong activity over the last 12 months has indeed continued, with price growth up to a new average median lot price of $228k, resulting in annual growth of around 8%. Despite the jump, Melbourne’s average lot prices are still by far the most affordable of the east coast, and possibly why the sales volumes have continued to trend higher over the last 9 months. There has been a bit of cooling though in the September quarter from the June peak, suggesting that supply could be somewhat further constrained, but as price growth continues, we may also see price point start to get out of reach of more first home buyers.
The outlook for Melbourne’s Property Development Market in growth areas is that prices are likely to continue to increase for a little longer but volumes may continue to moderate. Building activity – although reasonably strong – is likely to follow suit.
HIA statistics confirm that housing starts across Australia reached an all-time record in 2015/2016, with almost 230,000 new residential dwelling commencements, and 15% higher than predicted the same time last year. Although activity over the next 12 months is set to remain strong, the continued supply pressures reducing sales volumes have already started having an impact on dwelling approval numbers according to ABS data, with dwelling approvals trending downwards since around June 2016. Detached house approvals were recorded around 2% lower than September last year, and units around 10% lower.
The forecast for dwelling starts is set for a ‘measured’ decline over the next couple of years to more normal levels. Detached dwelling construction is likely to have a much ‘softer’ landing (9% over next 2 years) than multi-units, which are predicted to fall by over 40% over the next 2 years.
Melbourne’s trend followed suit, with a record 35,500 detached dwelling and 33,100 unit starts in 2015/2016, but is also forecast to decline in a similar fashion to the rest of the country, particularly with units.
Will be interesting to see what pans out….