The three factors that will influence Melbourne price growth
Melbourne had a solid year in real estate in 2013, its best since 2009/10, but it was well short of the “boom” claimed by some.
This has continued in the early part of 2014. Three different research sources, including the Australian Bureau of Statistics, broadly agree that the housing market has risen 10% or 11% in the past 12 months (although growth in the unit market has been considerably less – up about 5%, according to Australian Property Monitors).
The fundamentals of the Melbourne market – and several key regional markets – are strong and there should be further price growth in selected areas.
However, there are three key events which may influence prospects for price growth – a couple of them negative and one likely to be positive.
The first is the federal budget, which has hit consumer confidence and caused household belt-tightening. Consumer sentiment polls since budget night show a sharp decline in confidence.
The budget also makes severe cuts to funding to Victoria (and other states), particularly in the areas of health and education.
The second key event is the state election, which is scheduled for 29 November. Elections usually cause businesses and households to delay spending decisions.
Although this factor is somewhat overstated by media, the impact this year is likely to be enhanced by the federal budget and its consequences for Victoria’s finances.
The fundamentals of the Melbourne market – and several key regional markets – are strong and there should be further price growth in selected areas.
Marketers of real estate in Melbourne like to milk the mythical spring cow for all its worth, aided by a compliant media, but the so-called spring selling season is likely to be undermined by the undercurrent of political campaigning.
Beyond the political factors, the underlying fundamentals suggest growth in Victorian property markets. The latest data from the Australian Bureau of Statistics shows a 10.5% annual rise in loans to home buyers and a 24% annual rise in loans to property investors in Victoria.
And sections of the Melbourne market will benefit from the third key event, the Plan Melbourne document from the state government, particularly as many of the suburbs nominated as “national employment clusters” and as “key activity and job centres” already rate highly on the Hotspotting scale.
They include the municipalities of Brimbank, Dandenong, Wyndham, Whittlesea, Casey and Monash.
Dandenong City, which features in the plan as both an employment cluster and a key activity centre, is typical of areas which are under-rated by property buyers but which have all the credentials needed for solid price growth over time.
The power combination in real estate is affordability plus infrastructure plus jobs. Dandenong is one of several correct answers to that equation.
Others include the Sunshine precinct in Melbourne’s west (Brimbank City), the City of Casey in the south-east and Epping in the north in the municipality of Whittlesea.