BIS see greater weakness in Melbourne apartment market

Melbourne's median house price is set to be largely flat until 2020, while apartment values are likely to decline, according to the latest forecast from BIS Oxford Economics.

BIS have predicted declines in the apartment market, suggesting there are likely to be pockets of oversupply across Melbourne.

They believe unit prices will fall by a total of two percent in the three years to June 2021.

Angie Zigomanis, BIS Oxford Economics senior manager, said the supply is meeting the high population growth.

“Soaring population growth in Victoria is expected to be a key to house prices in Melbourne as investor demand continues to weaken, by supporting owner occupier demand,” said Zigomanis.

“While new dwelling completions are forecast to continue to rise through 2018, as the large pipeline of apartment buildings under construction work their way to completion, supply will be largely met by population growth.”

They have a stronger forecast for the housing market, although expect prices to remain relatively flat.

BIS expect just a one percent per year in the median house price, before an emerging downturn in new dwelling construction results in the city’s deficiency starting to trend upwards by 2020/21, which in turn will see a modest pick up in price growth.

They anticipate a six percent growth in the median house price in the three years to June 2021.

The median house price soared 65 percent over the five years to June 2017, with a further growth of two percent in the six months to December 2017, before a 0.2 percent drop in the first half of 2018.

Population growth and new dwelling supply have been cited as the biggest drivers in the median increase.